Economists forecast modest US economic growth for the remainder of this year through 2026, with persistent inflation driven by tariffs negatively impacting consumers.

GDP is currently expected to grow by 1.1% in the second half of the year, down from an average growth of 1.4% in the first six months, according to the latest monthly Bloomberg survey of economists. Consumer spending, the main driver of economic growth, is also expected to grow by 1.1% in the third and fourth quarters.

At the same time, economists expect core inflation — measured by the Personal Consumption Expenditures price index — to peak at an average of 3.2% in the fourth quarter. While annual inflation is expected to gradually slow through 2026, it will remain above the Federal Reserve’s 2% target.

Trump Tariffs

The results confirm expectations that the high tariffs imposed by former President Donald Trump on imports will have a broader impact on consumer prices and will only gradually fade next year.

The survey conducted from August 22 to 27, including 79 economists, indicates that the US economy will continue to adjust to the effects of the president’s trade and investment policies aimed at boosting growth. It also suggests the Federal Reserve will continue to face challenges from stubborn price pressures and weak economic activity.

Unemployment Outlook

Federal Reserve Chair Jerome Powell stated last week that the effects of higher tariffs on prices “are now clear,” but cautiously left the door open for a rate cut in September due to rising risks of labor market disruptions. Economists in the Bloomberg survey expect the unemployment rate to rise to 4.4% in the fourth quarter and remain at that level through most of 2026.

However, experts now estimate a 32% chance of a recession in the next twelve months, the lowest since March. While overall economic growth is expected to be modest, survey participants see accelerating business investment growth through 2026.

Yesterday, the Bureau of Economic Analysis reported that the US economy expanded in the second quarter at a slightly faster pace than initial estimates, supported by larger increases in intellectual property products and business equipment.