US to see real GDP growth of 1.7% in 2025, 1.6% in 2026: S&P Global

It thinks real GDP growth will weaken to 1.1 per cent by the fourth quarter (Q4) of 2025 from 2.5 per cent in Q4 2024.

It expects weaker growth in the near-term to soften the US labour market further in the next 12 months, with the unemployment rate rising to 4.6 per cent by the first half of next year, before gradually returning to its long-run average of 4.1 per cent by mid-2027.

It believes tariffs will settle below their April peak in the coming months, but still materially higher than 2024, and therefore, anticipates core consumer price inflation of 3-3.5 per cent by the end of the year.

The Federal Reserve’s funds rate is expected to be 3.75-4 per cent by end-2025 and will reach its nominal neutral of 3-3.25 per cent by end-2026, S&P Global Ratings said in a release.

It thinks the US economy’s resilience will wear a little thin in the second half of this year, when growth slips below trend and the unemployment rate rises.

While the rating agency’s base case is that the United States will avoid recession in the near term, it thinks the risk of a downturn is elevated despite the country’s solid growth momentum at the start of the year.

There’s a 30-35 per cent probability of a downturn starting in the next 12 months—notably higher than the post-World War II unconditional recession probability of 13 per cent, S&P Global Ratings noted.

Uncertainty around trade, deregulation, fiscal policy, geopolitics, and immigration remains elevated.

ALCHEMPro News Desk (DS)