Kiplinger GDP Outlook: 2026 Growth Looking Better

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Despite below-average GDP growth of 1.4% in the fourth quarter of last year, the economy should expand by around 2.8% in 2026, a step up from 2025’s 2.2% pace. Spending in 2026 will be boosted by tax refunds, high-end consumer spending supported by strong investment returns, business investment in artificial intelligence, and a possible recovery in the manufacturing sector. 2026 ought to look a lot like 2024, in terms of economic growth.

The six-week government shutdown in October-November subtracted 2.3 percentage points from fourth-quarter growth. This will be reversed in the first quarter, when growth will likely run above 3.0%. A better measure of underlying economic momentum is to look at final sales to private domestic purchasers, which measures consumer and business spending, but excludes inventories, exports and imports, and government spending. This rose 2.4% in the fourth quarter, which was roughly the average level for 2025 as a whole. Consumer spending on goods such as motor vehicles was flat, but spending on services grew at a robust rate. Business spending on equipment was healthy, and construction of both housing and commercial buildings declined less than previously.

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Eventually, economic growth will return to an average of 2%, simply because of slow labor force increases, even if productivity gains remain elevated. These two factors determine how fast the economy can grow without overheating and creating rising inflation. We expect this more-moderate GDP growth to occur in 2027.

While the recent Supreme Court ruling invalidating some of the administration’s tariffs will benefit importers and some producers, we don’t expect this will have a major effect going forward. The White House will act quickly to reissue many of the tariffs under different legal authority than the one the court invalidated, though the process for implementing those new levies may be slowed down. Those businesses that imported under the invalidated tariffs will eventually get their money back, though it is likely to take a while. Businesses should be able to make investment and import plans more easily now that the courts have drawn boundaries around tariff implementation. However, expect many more court cases in the future.

Source: Department of Commerce: GDP Data

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.