We are now just weeks away from finding out who will be taking up residency in the White House for the next four years. Former president Donald Trump and Vice President Kamala Harris appear to be neck-and-neck as polling day draws ever closer.
But what are the implications for the US economic growth? Which candidate will have the most positive impact on economic trends in the US?
In our US economy forecast for 2025, we examine key drivers, such as inflation and interest rates, and highlight analysts’ US GDP growth forecasts.
Key Takeaways
US economic growth is expected to slow as we enter 2025 but recession fears have virtually evaporated.
Interest rates are expected to fall to 4.5% this year and then down to 3.5% by the end of 2025, according to Fitch Ratings.
US GDP projections for year-end 2024 indicate steady growth, with forecasts ranging from 2.1% to 2.7%.
Inflation is predicted to slow down, with estimates between 2.5% and 2.8%, as price pressures ease.
Unemployment is likely to rise slightly to 4.3%-4.4%, and consumer spending is projected to stay stable at 2.5%, as households remain cautious.
The US election race is still too close to call, and the outcome is expected to have a significant effect on taxation.
As of mid-October, Vice President Kamala Harris has a 53% chance of winning the 2024 Presidential election, while former President Donald Trump stands at 47%. The outcome will likely be decided by key battleground states.
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US Economic Outlook 2024
The US GDP increased at an annual rate of 3% in the second quarter of 2024, according to the US Bureau of Economic Analysis. It had risen 1.6% in the first quarter.
It stated: “Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending. These movements were partly offset by a downturn in residential fixed investment.”
So, what will happen over the coming months? Will the US economy get better, or should we expect a period of volatility after the election?
US GDP Projections for Year-End 2024
Looking ahead, most US GDP projections suggest that growth will slow as we enter 2025, although a recession isn’t on the cards.
By the end of 2024, US GDP projections suggest a mixed outlook. Vanguard expects a slower growth of 2.1%, while EY is more optimistic, forecasting a 2.7% increase. These numbers reflect a cautious but steady economic path as inflation cools and the job market adjusts.
Businesses are still anticipating a soft landing for the US economy, based on the latest flash Global Risk Survey from Oxford Economics.
It stated: “Despite recent market jitters over the potential for a US recession, less than one-in-10 respondents think a sharp slowing in US growth is likely over the coming twelve months.”
However, it revealed concerns about the potential fall-out from a Trump presidency had increased for the third consecutive survey:
“More than two-fifths of businesses (43%) now cite a Trump presidency as a very significant risk to the global economy – a greater proportion than for any other geopolitical risk.”
Rob Haworth, senior investment strategy director for US Bank Asset Management, is optimistic despite acknowledging that obstacles may still appear.
“Modest, steady economic activity continues to be the path we appear to be on at this point, with no serious recession risk,” he wrote in an analysis.
S&P Global Ratings expects the US economy to expand 2.7% this year and 1.8% in 2025 on an annual average basis.
Satyam Panday, chief US economist at S&P Global Ratings, believes GDP growth will slow to below-trend next year, accompanied by a further rise in the unemployment rate and lower inflation.
“The Fed looks set to embark on a steady series of interest rate cuts,” he said. “We have penciled in policy rates to reach the terminal rate of 3%-3.25% by the end of 2025, with risks in both directions.”
Jason Hollands, managing director of Bestinvest by Evelyn Partners, agreed that the economy looked to be in pretty good shape.
He told Techopedia:
“The US recession fears that previously stalked the market have pretty much evaporated, with the economy showing remarkable resilience,” he said. “With the tailwind of rate cuts, it really does look like the much talked of ‘soft landing’ scenario will be achieved.”
So, what is the US economic outlook for 2025?
Economic Drivers Shaping the US Economy in 2025
The US economic outlook for 2025 has many drivers. If we want to make plausible US economy predictions, we should consider inflation, interest rate movements, and job data.
US Inflation Forecast for Year-End 2024 & Beyond
In the US, inflation hit a high point in 2022 at 6.6%, up from 4.1% in 2021. By 2023, it slowed down to 3.8%, indicating that inflation pressures were easing.
The annual inflation rate in the US slowed for a sixth consecutive month to 2.4% in September 2024, the lowest since February 2021, according to Trading Economics.
US inflation forecasts for year-end 2024 see inflation dropping further to 2.8% (Vanguard) or 2.5% (EY). This difference suggests that Vanguard sees inflation as a bit more persistent, possibly due to factors like housing costs.
Moving further, the inflation rate is expected to decrease to 2.1% by 2029, according to Statista, which is way below the 8% level it reached back in 2022 due to COVID-related factors.
US Interest Rates Forecast 2025
In September, the US Federal Reserve lowered interest rates by 50 basis points, easing monetary policy for the first time in four years.
Cristina Dwyer, an analyst at JP Morgan Wealth Management, pointed out that it brought the interest rate target to a range of 4.75% to 5%. She wrote:
“The Fed’s decision to ease monetary policy is likely to support growth and stabilize a slowing labor market.”
The Fed’s rate cuts are bringing things back to a more balanced level without pushing the economy into a recession. As a result, both EY and Vanguard expect more cuts. Vanguard predicts rates to be between 4.25% and 4.5% by the end of 2024, and EY’s projections align, forecasting interest rates to settle around 4.4%.
Looking ahead, interest rates are expected to fall to 4.5% this year and then down to 3.5% by the end of 2025, according to Fitch Ratings. It stated:
“We now expect the Fed to cut rates by 25bp at both the November and December meetings, followed by four more 25bp cuts through 2025, with rates being lowered at every other FOMC meeting next year.”
Jobs Market: The US Economic Forecast for Unemployment Rate
Observers had felt a slowing labor market would negatively impact economic growth. Still, the latest official jobs data has caused them to reconsider, according to Ira Kalish, Deloitte’s chief global economist.
“The report indicated a stunning level of job growth and a decline in the unemployment rate,” he said in his latest US economic forecast. “In response, bond yields increased, equity prices rose modestly, and the value of the US dollar rose against major currencies.”
The Bureau of Labor Statistics found that 254,000 new jobs were created in September 2024, which was the greatest monthly number since March and exceeded investor expectations.
“Employment continued to trend up in food services and drinking places, health care, government, social assistance, and construction,” it stated.
In September 2023, the unemployment rate was 3.8% – but by mid-2024, it had risen to 4.3%, reflecting a gradual increase in the number of people looking for work.
By the end of 2024, EY predicts the rate will go up to 4.4%, while Vanguard expects it to be slightly lower at 4.3%. This rise matches expectations that the job market might still slow down a bit, with businesses being more careful about hiring and pay.
Consumer Spending
In 2021, US consumer spending shot up by 8.8%, likely due to pandemic recovery and government stimulus. However, in 2022, the growth slowed down to 3%, and by 2023, it had further dropped to 2.5%.
Looking ahead, EY predicts that consumer spending will stay steady at 2.5% through 2024. This reflects a more cautious approach from households as the economy slows and the job market weakens.
US Elections 2024 Outcome Prediction: Latest Poll Results
2024 Presidential Election Interactive Map
As of October 17, 2024, FiveThirtyEight’s forecast gives Vice President Kamala Harris a 53% chance of winning the election, while former President Donald Trump has a 47% chance. These predictions come from 1,000 simulations, which look at polls, the economy, and other important factors.
Simulated electoral outcome by FiveThirtyEight, as of October 17, 2024
Across the 1,000 simulations:
Harris wins in 531 simulations
Trump wins in 466 simulations
There’s less than a 1% chance of no Electoral College winner
Polling Trends
The national polls slightly favor Harris, but the race is still close in key battleground states like:
Pennsylvania: Harris leads by 0.6%
Nevada: Harris leads by 0.8
North Carolina: Trump leads by 0.5%
Georgia: Trump leads by 1.4%
Closest US election races by state. Source: FiveThirtyEight
Recent Changes
Harris’s chances have improved since early October, with polls showing she’s making gains in several important states. However, Trump still has strong support in states like Florida, and some polls might be undercounting Republican voters.
What’s Next?
Even though Harris has a small lead, the race is very competitive. Both campaigns are focusing on swing states, and the final result will likely depend on voter turnout and any last-minute changes in public opinion.
White House Race: Who Will Emerge Victorious?
At the moment, it’s anyone’s race, with a national NBC News poll released three weeks before polling day revealing that the two candidates are deadlocked.
Historian Allan Lichtman, dubbed the Nostradamus of US presidential elections, has predicted that Kamala Harris will be the victor.
His approach, which is based on a 13-key model system highlighting different categories related to the presidency, has been used with tremendous success since the mid-1980s.
A Divided Result
Elsewhere, Ben Yearsley, director of Fairview Investing, believes the best outcome for the US is to have separate parties controlling the White House and Congress.
He told Techopedia:
“Conversely, the worst possible outcome is a clean sweep for either party,” he said. “When you have less than capable leaders, as is the choice this time, limiting their power by having to work with the opposition parties is the best way to curtail their ineptitude.”
Yearsley also pointed out that both candidates were protectionist in their outlook and likely to impose some level of tariff on various sectors, especially Chinese-related industries.
“Under Harris, there will be tax rises, especially corporate taxes,” he said. “Trump will probably give tax cuts. However, both have unaffordable plans that do nothing to tackle the huge budget deficit.”
Impact on Stock Markets
However, the good news is that US markets have generally risen in election years, according to research by Denise Chisholm, director of quantitative market strategy at Fidelity.
It discovered that the average return generated over the 12 months preceding a presidential election hasn’t been substantially better or worse.
“This points to the presidential election not being a notably ‘market-moving’ event,” she said. “The election cycle is usually not the dominant theme of the market.”
Sector Winners & Losers
Dan Coatsworth, investment analyst at AJ Bell, believes there will be corporate winners and losers, depending on who makes it into the White House. He said:
“Green energy and technology are the key industries to watch if Kamala Harris wins the US presidential election, while defense contractors, oil and gas producers, and cryptocurrencies will be front of stage if Donald Trump is victorious.”
One potential big winner should Trump return to the White House might be cryptocurrencies, as he had pledged to make America the ‘crypto capital’ of the planet.
“In theory, cryptos could see the biggest and most immediate price action if Trump wins,” he explained. “However, it’s interesting that the Bitcoin price has been volatile in recent weeks, suggesting that some investors and traders might be waiting for a stronger signal that Trump will win before going all-in on the digital currency.”
US Economy: Which Candidate Will Be the Best?
Whoever wins will have the power to influence the future of the US economy but the extent to which this is possible won’t be known for some months.
The upcoming election has “injected a degree of uncertainty” about the future direction of fiscal policy, according to Jason Hollands at Bestinvest.
While he acknowledged that the ability to implement policy also depended on which party seizes control of the House of Representatives and the Senate, he highlighted some concerns.
He told Techopedia:
“While the Fed is independent, the President gets to appoint the Chair, and Donald Trump has been critical of Fed decisions and stated he won’t reappoint Jerome Powell if elected,” he said. “It’s possible that he could disrupt the independence of the Fed by nominating a partisan Chair.”
Trump’s Economic Policies: Tax Cuts & Trade Wars
In addition, while much of the election campaign has focused on issues such as border control and culture wars, there are clear differences in economic policy.
“Trump’s agenda comprises tax cuts, in the form of lower corporate taxes and an extension of the personal tax cuts he previously put in place,” Hollands said. “His agenda also favors deregulation, as seen in his first administration, and a return to ‘trade wars’ with the implementation of a universal 10% tariff on imports – and 60% in the case of Chinese imports.”
Green Commitment Expected From Harris
Hollands suggested that Kamala Harris had been “quite lite on policy detail,” having only entered the race at a late stage. Her interviews have been vague on policy.
“A starting assumption is that she will continue in the broad direction of the Biden administration in which she has served, which includes a commitment to the ‘green’ agenda and a more aggressive approach to antitrust regulations (competition policy), which has included challenging the dominance of Big Tech,” he said.
Sector-Specific Impacts of Election Outcomes
While drastic policy shifts are unlikely, there are important sector-specific implications to consider, according to Darius McDermott, managing director of FundCalibre.
He told Techopedia:
“Another critical concern is the Democratic proposal to tax unrealized capital gains – a prospect that deeply unsettles ultra-wealthy tech billionaires. Democrats have also floated the idea of increasing the tax on share buybacks, currently 1%, which could further erode tech profits.”
In addition, McDermott believes the fact that Trump’s running mate, JD Vance, is a former venture capitalist from San Francisco, could “strengthen the ticket’s appeal” to the tech sector.
“Oil and gas stocks might also see a boost if Trump regains office, given his consistent support for traditional energy sources,” he added. “However, it’s important to note that energy stocks are heavily tied to broader economic factors – as clearly demonstrated during Biden’s presidency when the sector outperformed due to rising geopolitical tensions.”
The Bottom Line
In 2024, the US economy is set to grow steadily, with inflation cooling down and interest rates dropping to about 4.4%. Unemployment might rise a little, but consumer spending should stay stable. In the election, Harris has a slight edge as of mid-October, but the race is still very close.
The good news is that economic conditions in the US appear to be in pretty good shape and have been bolstered recently by strong jobs data.
So, even though the rate of GDP growth is likely to slow over the coming months, a recession certainly seems unlikely at this stage.
However, there are numerous variables at play, affecting the US economic trends, with the looming presidential election having the potential to destabilise the economic outlook.
FAQs
What is the future of the United States economy?
S&P Global Ratings expects the US economy to expand 2.7% this year and 1.8% in 2025 on an annual average basis.
Will the US economy hit a recession?
A recession in the US is not currently expected as the economy appears to be in resiliently good shape.
Will the US economy get better soon?
It’s expected to expand by 2.7% this year and then by 1.8% in 2025 on an annual average basis, according to S&P Global.
What will the US economy look like in 2025?
No one knows for sure. However, the consensus appears to be that economic growth will slow down over the coming months.
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