U.S.: More growth, more inflation and fewer rate cuts – National Bank of Canada

The latest U.S. data suggest that the economy will end the year on a high note. As has been the case for some time, the current strength reflects solid growth in consumer spending, due not only to the resilience of the labour market, but also to the steady increase in household net worth, NBC’s economist Jocelyn Paquet reports.

GDP set to grow by 1.7% in 2026

“As the drivers of recent performance are likely to remain the same in 2025, the U.S. economy should continue to outperform that of other rich countries, provided the new Trump administration sticks to the most pro-growth part of its agenda and keeps its protectionist instincts to a minimum.”

“While recognizing the high level of uncertainty surrounding these projections, our best guess at this stage is that the spending cuts announced by the Trump administration will be insufficient to prevent tax cuts from widening the deficit further. We therefore expect fiscal policy to have a positive impact on growth over the next two years. On the international trade front, we believe that Washington will refrain from imposing blanket tariffs, opting instead for a more targeted, less disruptive approach.”

“Against this backdrop, we have decided to significantly revise upwards our growth forecast for 2025, to 2.1%. GDP should then grow by 1.7% in 2026.”