US 2026 outlook: Economy will continue to navigate choppy waters
AI investment offsets tariff pressures as growth moderates in 2026
We expect the US economy to slow further in the second half but avoid a recession. The boost from AI-related investment in equipment and structures won’t taper off, supporting the economy as it continues to digest the impact of tariffs and the surge in policy uncertainty.
The economy is reaping the benefits of significant increases in AI-related investment, which has sufficiently offset the weakness elsewhere in business equipment spending. This investment is a key factor in our above-consensus forecast for 2026 GDP growth, along with One Big Beautiful Bill Act investment incentives to support businesses’ non-AI equipment spending next year.
Tariff pass-throughs will intensify this fall, but inflation is poised to moderate next year, helping the economy find its footing. Businesses have eaten some of the cost of tariffs, squeezing profit margins and reducing hiring, which has weakened the labor market.
The economy will remain bifurcated:
- Lower-income households will struggle due to regressive fiscal and trade policies.
- Higher-income households will continue to benefit from gains in household wealth.
- Small businesses will face pressure from high interest rates, rising input costs, and slowing sales while large businesses are in a better position.
Download the report to see how AI investment, trade and fiscal policies, wealth effects, and labor trends are shaping the 2026 US economic outlook.
