It foresees real consumer spending growth to hit a cycle low over the next two years, while artificial intelligence (AI)-related hard and soft infrastructure will likely continue to drive investment growth.
Low-hire, low-fire is likely to remain the story in the labour market. It predicts consumer price inflation will persist near 3 per cent in first half (H1) of next year before falling back toward 2 per cent.
It continues to pencil in a 25-basis-point (bps) funds rate cut by the Federal Reserve (Fed) in December, followed by 50 bps of easing over H2 2026. However, a data-dependent Fed may choose to wait until January to cut instead, due to delays in top-tier data (from the recent government shutdown).
It anticipates that this year's US tax and spending bill, also referred to as the One Big Beautiful Bill Act, will support next year’s consumer spending.
The rating agency expects consumer spending to hit a cycle low of 1.8 per cent in 2027, conditioned on net immigration growth tracking close to zero.
It assumes artificial intelligence (AI)-related spending will continue to power real private investment next year, but at a slower pace (in growth terms) given supply constraints and already high levels of spending heading into next year.
On a fourth quarter-over-fourth quarter basis, the rating agency now expects real US GDP growth to be 1.8 per cent and 2 per cent in 2025 and 2026 respectively.
In 2027 and 2028, it forecasts real GDP growth will slow further, averaging 1.8 per cent annually. That slowdown in growth will be the net result of several factors, including the lessening of the 2025 reconciliation act’s near-term boost to aggregate demand and the drag from slower labour force growth.
ALCHEMPro News Desk (DS)
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