Kiplinger GDP Outlook: Goldilocks Economy Neither Hot nor Cold
Moderate 2% growth pace to continue into 2027.
Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
Source: Department of Commerce: GDP Data
The economy is in its Goldilocks phase, where it is neither hot nor cold; neither heating up nor slowing down. After 2.1% growth in 2025, GDP grew a moderate 2.0% in the first quarter, and while quarterly growth going forward may bounce up and down a bit, it looks like annual growth will also come in at 2.1% in both 2026 and 2027. Expect that 2% growth will become roughly the norm from now on, since it represents the sum of productivity and labor force increases, which determine long-run economic growth potential.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
First-quarter growth represented a step up from the anemic fourth-quarter 2025 pace of 0.5%, which was dragged down by the government shutdown that lasted to the midpoint of the quarter. The first quarter of this year also saw its challenges: Consumer spending was flat because January snowstorms deterred shopping for cars and in-store purchases, while boosting e-commerce sales. Businesses spent heavily on computer equipment and semiconductors related to the artificial intelligence frenzy, but much of this hardware was imported, and so had only a modestly positive effect on U.S. economic growth. Home building was also hurt by snowstorms, and fell in the first quarter, but it should recover in the second. Home construction activity will likely end the year little changed. Nonresidential construction declined for the ninth consecutive quarter, though a bottom is likely coming soon.
Federal government spending recovered only partially from the shutdown, and is not likely to be a driver of GDP growth in the future, as federal payrolls are still declining. However, defense contractors are likely to do well, especially those manufacturing missiles and interceptors to restock inventories after the Iran war.
While the 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, since many tariffs remain on the books. 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.
Read more
