S&P forecasts real GDP growth to slow to 1.1% by year end, yet the running estimate of real GDP growth in June is 2.9%, according to the Atlanta Federal Reserve Bank.
The U.S. economy right now, according to analysic by Deloitte, shows its at a Y in the road. In one direction, trade tension ease, and the running estimate from the Atlanta Fed becomes a possible growth rate. Or, higher trade tension remain, and S&P’s forecast becomes the growth rate.
In the higher tariff scenario, “costs coupled with elevated interest rates cause businesses to slow their pace of investment and hiring throughout the remainder of 2025 and into 2026. This may lead to the unemployment rate to rise to 4.6% in 2026,” Deloitte said.
Elevated trade barriers on US imports as well as exports slow the pace of international trade, with real imports of goods and services falling by 7.1% in 2026, and real exports falling 1.8%. As a result, real GDP growth is expected to be 1.4% in 2025 and 1.5% in 2026. Real GDP accelerates in 2027 and 2028 before settling into its steady-state growth rate of about 1.8% in 2029.
In Deloitte’s “trade tensions ease” scenario, the U.S. economy “is still expected to grow at a slower rate in 2025 compared with the previous two years,” Deloitte said. “In particular, consumer spending had been growing at a much faster rate than income, suggesting that consumption would slow this year. However, lower tariffs allow for inflation to fall more quickly, which gives consumers additional purchasing power.”
More trade deals and lower tariffs unleash business investment, which had been subdued due to economic policy uncertainty. Lower interest rates and inflation also help to support business investment. Additionally, we assume that deregulation and gains from artificial intelligence improve, leading to a rise in productivity growth over the forecast period.
Small Business Confident and Investment
Business confidence is weakening in the face of uncertainty, Deloitte reported, pointing to the falling optimism index of The National Federation of Independent Business.
Since December 2024, the index had been falling, though it recovered slightly in May. Plans to make capital expenditures had fallen to the lowest since 2020 in April and remained weak in May. In addition, several regional Federal Reserve Bank surveys indicate a relatively weak outlook for business conditions.
Here’s the scoop on Deloitte’s report on business investment:
Many firms still have more cash on hand than they did before the pandemic, and they can consequently avoid borrowing at elevated rates.
- After posting a 1.5% decline in the first quarter of 2025, we predict investment in structures will continue to fall into the first quarter of 2026.
- Overall, we predict investment in structures to fall 1.6% in 2025 and 0.9% in 2026.
- The decline in structures investment in 2026 obscures a rebound that occurs in the second quarter of 2026.
Spending on machinery and equipment (M&E), such as on computers or industrial equipment, and on intellectual property, such as software or AI accelerated in the first quarter of 2025 to avoid tariffs.
- Real spending on equipment grew by 24.7% (at annual rates) in the first quarter of 2025 compared with the previous quarter.
- We expect growth to drop substantially as tariff costs begin to bite. Investment in intellectual property products is expected to remain stronger as it is far less exposed to tariffs.
- Our forecast shows M&E investments rising just 0.1% in 2025 and declining 2.5% in 2026.
- We see intellectual property spending rising 2.4% in 2025 and 3.7% in 2026.
Higher tariffs and interest rates are restraining growth in the near term. Overall, in 2025, Deloitte predicts business investment to rise just 0.7%, slowing from the 3.7% recorded in 2024.
If interest rates come down and businesses see less uncertainty from federal policy, business investment will grow 1.1% in 2026 and 4.6% in 2027.