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The Key Takeaways
- According to forecasts, the U.S. economic growth will be steady in 2025.
- Expectations of economic growth are supported by strong consumer spending, a robust job market and expectations that the economy will continue to grow.
- Donald Trump, the incoming US president’s policy is a wildcard. The tariffs and deportations in mass could be detrimental to the economy.
Forecasters believe that the U.S. will grow at a steady pace in 2025. The odds of an economic downturn in the last few months have decreased.
Since the Pandemic, U.S. economic growth has increased every year. And forecasters believe that this trend will continue in coming years. But it may be slower. According to the Federal Reserve Bank of Philadelphia’s November survey of economic experts, the Gross Domestic Product (GDP), a measure of all the output of the U.S. economy that is widely used by the Bureau of Economic Analysis will grow by 1.9% annually in the fourth quarter of 2020.
These same economists predicted that there was a 22,4% chance for a quarter to have negative growth, down from the 25% in the prior round of the survey. In November, Goldman Sachs economists predicted that a strong consumer market and an active labor force would continue to support the economy.
Experts have grown increasingly confident that the U.S. can pull off this historically rare feat “soft landing” The country was reopened after the pandemic, and the household budgets were strained by the high inflation.
In 2022, the Federal Reserve began a campaign to raise interest rates. The goal was to reduce inflation through raising borrowing costs. However, this could send the economy into an economic tailspin or cause a massive wave of job losses. Many economists believed that a recession would be on the horizon in 2022 or 2023. This is what usually occurs after an inflation cycle and anti-inflation hikes.
Inflation has almost returned to its pre-pandemic peak, while the jobs market remains resilient. As the economy continues to grow, the Fed is beginning to reduce rates.
The median five-year growth rate was 2.6%. If this growth matches the forecast of 1.9%, the rate would be slightly slower. The economy grew faster after a massive downturn in 2020 and grew at a 3.1% annual rate in the third quarter, according to the latest estimate.
Tariffs could drag down growth
Donald Trump, the president-elect, is an unpredictable factor in economic forecasts. This is due to his promise during campaigning that he would impose large and high tariffs on imported goods, particularly those coming from China.
Goldman Sachs forecasters expect Trump to only impose limited tariffs. They expect that this will have a minimal effect on the economic situation. But economists are concerned that Trump’s heavy tariffs could cause prices to rise, increase inflation and bring the economy down.
“The biggest risk is a large across-the-board tariff, which would likely hit growth hard,” Jan Hatzius is the chief economist of Goldman Sachs. He wrote a comment with several other economists.
Goldman forecasters, however optimistic they may be, expect the US economy to expand at an annual pace of 2.5% in 2025.
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Federal Reserve Bank of Philadelphia. "Fourth Quarter 2024 Survey of Professional Forecasters."
Goldman Sachs. "The US economy is poised to beat expectations in 2025."
Bureau of Economic Analysis. "Gross Domestic Product (Third Estimate), Corporate Profits (Revised Estimate), and GDP by Industry, Third Quarter 2024."
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