Economists see stronger economic growth this year despite uncertainty

Article originally posted on CoStar on October 16, 2025

The outlook for economic growth in the coming year has improved since the depths of uncertainty in the early summer, according to a new quarterly survey released by the National Association for Business Economics.

And though the foundations of that expansion rest on a narrowing set of economic pillars, economists are increasingly aligned in their expectations for slower, but positive progress in the near term.

The 40 professional forecasters who responded to the survey, released Monday at the group’s annual meeting, increased their projection for year-end, inflation-adjusted gross domestic product growth to 1.8%. Though that is down from the 2.4% annual real GDP growth in 2024, it is up from the respondents’ median projection of 1.3% in the June survey. The outlook for 2026 also remained relatively strong, with respondents increasing their forecasts for annual growth to 1.7% from 1.4% in June.

A sharp rise in the outlook for business investment growth, driven largely by the build-out of artificial intelligence and data center infrastructure, contributed significantly to the improved outlook. Respondents expected nonresidential fixed investment to close 2025 with growth of 3.8%, up from a projected 1.6% in the June survey and well above the 2.9% actual growth in 2024.

Continued consumer spending, driven by higher asset prices, has supported continued economic growth. Although survey respondents expected a slightly softer year for consumer spending in 2025, with real annual growth of 2% in the October survey, down from 2.3% in the June survey, the outlook for spending in 2026 increased to 1.6% in October from 1.4% in June.

Respondents cited tariff impacts as presenting the greatest downside risk to the economy, followed by persistently high inflation. Although expectations for core inflation in 2025 decreased to 3.1% in the October survey from 3.3% in June, they increased for 2026 to 2.5% from 2.4% in June.

Recession calls remained limited, with two-thirds of respondents putting the odds of a recession in the next 12 months at between 20% and 40% and another 16% putting the odds at lower than 20%.

Respondents were also more in agreement in the October survey than in June.

“It is interesting that the consensus has more certainty to it,” said Martin Holdrich, senior economist from Woods & Poole Economics, a firm that provides U.S. county-level projections. “But I don’t think that that means these are certain outlooks. It just means there are fewer outliers and some coalescence.”

Lessening uncertainty around tariff policy and stabilization of consumer spending likely contributed to the improved outlook. The survey collection period was Sept. 16 and 17, predating the early October flare-up of tariff tensions.

One area where uncertainty remains high is the labor market. Respondents revised down their employment growth forecasts for 2025 to 60,000 monthly job gains from 87,000 in the June survey. For 2026, the median projected monthly jobs added fell to 75,000 from 97,000.

Gregory Daco, Ernst & Young’s chief economist, said that reflects both slower demand and tighter immigration policy.

“We are in this uncomfortable balance when it comes to the labor market,” Daco said. “There has been a notable downward shock to labor market dynamics due to reduced immigration. I would contend that labor demand has actually been weaker than labor supply. Because when you look at a broad range of labor market indicators, not just over the last two or three months but really over the last 18 months, you’ve seen a deceleration in labor demand growth.”

Whether this decline is based on economic slowing or indicative of adjustments to a tighter labor supply by increasing productivity remains uncertain. However, economists are growing increasingly optimistic that productivity growth could accelerate. The share of respondents rating stronger productivity growth as a potential upside risk for the economy increased to 53%, up from 36% in June.

The survey results were announced at the fall meeting of the economists organization in Philadelphia. The overarching theme was economic transition, a nod in part to the current administration’s moves to uncouple the United States from international relationships that had been strengthened over the past decades. Economists from around the nation discussed the impacts and implications of trade policy and immigration restrictions, the rise of artificial intelligence and the outlook for labor markets, small businesses and consumers in an era of heightened uncertainty.

A notable standing ovation welcomed Federal Reserve Chairman Jerome Powell to the stage on the meeting’s final day, as he received the group’s Adam Smith Award, a recognition of Powell’s knowledge and leadership in economics. In his comments, he offered a retrospective road map of monetary policy actions in the past 20 years, answering some critics of those steps, and suggesting the committee may cut its target rate again soon in the face of further weakening of the labor market and an absence of reliable government-provided data. A second standing ovation closed his appearance.