Economic Forecast

Economic forecast is the process of predicting the future values of economic variables. This requires the use of a model, which is an approximation to a set of economic behavioral patterns. It also requires knowledge and not a little faith that these patterns will persist in the future. The variables most frequently predicted are Gross Domestic Product (GDP) from the national income accounts and unemployment.

Global growth is expected to slow this year and next as a result of the rise in trade barriers and elevated policy uncertainty, with only a tepid recovery in 2026-27. Downside risks include escalating trade restrictions, more severe financial strains in major economies, surges in political and social unrest, further declines in official aid, and worsening natural disasters.

The US economy continues to navigate a complex set of crosscurrents, making it difficult to get a clear reading on underlying momentum. Tariff-induced cost pressures, persistently high inflation, and elevated interest rates are dampening employment, business investment, and household consumption.

The vast majority of respondents in this month’s Survey expect declining rather than improving conditions at home and abroad, with a significant number expecting rising unemployment. This is partly a result of a re-escalation in tensions over trade, but it is also because global growth prospects are weaker than previously thought and the Fed may need to tighten its policies sooner than expected. In addition, a reversal in immigration is likely to limit the labor force’s contribution to growth.