Kiplinger GDP Outlook: Look for Moderate 2% Growth in 2026
Expect the economy to expand at a decent but not rapid pace over the next couple of years.
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GDP grew a very strong 4.3% in the third quarter of 2025, boosted by consumers who continue to spend freely, by continued investment in artificial intelligence, and by the resumption of growth in exports and federal government spending. These positives countered continued weakness in housing and nonresidential construction.
Fourth-quarter growth should be weak, though. Consumer and business spending will pull back to some degree, after rising earlier in the year to get ahead of Washington’s new tariffs. Motor vehicle sales in particular will come in lower, given the surge in the third quarter. Of course, government spending will be affected by the federal shutdown. Government employees will receive back pay, but government contractors will not, unless they were on previously funded projects. But one positive is that strong stock market gains this year should keep wealthier consumers spending freely.
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Moderate 2% growth is here to stay for a while. 2025 total annual growth will be around 2.1%, because the annual growth figure is measured from 2024’s midpoint through mid-2025. We expect this moderate growth trend to continue through 2026 and 2027.
Trade deals with various countries have reduced the uncertainty that exporters and importers face, but if businesses can now plan better, they may pass on more of their tariff costs to customers. The effective tariff rate on imports is now around 15% across all goods. Higher rates are being imposed on commonly imported items, such as home furnishings, toys, sports equipment and the like, but have not had a large impact on the Consumer Price Index yet. Price increases on motor vehicles will likely be coming later as inventories of pretariff imported vehicles run low.
Tariffs will not cause a broader recession in the economy. Consumers are still keen to spend, despite low consumer sentiment in surveys. Expected large tax rebates during tax filing season in February and March will also help. However, growth in consumer spending will be constrained by a slowdown in personal income growth that has already begun, and by slower growth in stock market gains after three strong years. It seems likely that consumer saving rates will start to edge up after dropping in September to 4.0% of income, almost a three-year low.
Source: Department of Commerce: GDP Data
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