U.S. Economic Outlook

The U.S. economy maintains a 2% growth trajectory driven by AI investment, despite rising inflation from energy costs that has delayed expected Federal Reserve rate cuts until late 2026.

Key Takeaways

• 1.Real GDP growth remains steady at approximately 2.0%, primarily driven by resilient consumer spending and a surge in AI-related business investment.
• 2.Inflation forecasts for 2026 have been revised upward due to higher oil prices and cost-push pressures from the AI infrastructure buildout.
• 3.The labor market is characterized as 'no hire/no fire,' with nonfarm payrolls expected to average only 55K per month for the remainder of the year.

Table of Contents

• Key Themes
• Sector Analysis
• Personal Consumption Expenditures (PCE)
• Investment: Equipment, Intellectual Property Products and Inventories
• Investment: Residential
• Investment: Nonresidential Structures
• Net Exports & Trade
• Labor Market
• Inflation
• Fiscal Policy
• Monetary Policy & Interest Rates

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