Despite a burst of early-year activity, analysts point to fleeting factors like front-loaded consumer spending and tariff-induced inventory buildups as the primary causes. Beneath the surface, the structural forces dragging on growth are becoming harder to ignore.

Industrial production is forecast to contract by 1.5% in 2025, deepening from a -0.3% decline in 2024. The sector is bearing the brunt of recent tariff hikes and supply chain disruptions, with uncertainty around trade policy undercutting confidence. Capital investment is also faltering. Fixed investment is projected to slump to a mere 0.7% in 2025, following a robust 4.3% gain in 2024. Companies are pulling back on big spending as financing costs remain elevated and the global demand outlook dims.

Meanwhile, consumption growth—traditionally the engine of U.S. economic resilience—will barely hold steady at 1.5%, as higher prices and dwindling savings temper household enthusiasm. The resilience of private balance sheets has helped avoid an outright contraction, but that cushion is thinning. The fiscal tailwinds that powered previous expansions are also fading fast, with little political appetite for new stimulus amid contentious budget negotiations.

The Federal Reserve, for its part, is adopting a cautious stance. While inflation pressures have cooled, the central bank is wary of loosening policy too quickly and reigniting price instability. This cautious posture, combined with tightening credit conditions and softening global trade, leaves little room for upside surprises.

While not technically a recession, the 2025 forecast signals stagnation with a side of stress. For boardrooms and investors, it’s not just about reading the numbers—it’s about navigating the fog. As the chart from Oxford Economics shows, 2026 and 2027 offer some rebound hope, but the road there will be uneven and policy-laden. For now, growth is on mute.

Sources & Further Reading

BBC. (2025). Who are the tariff 'PANICANS' derided as 'weak and stupid' by Trump? https://www.bbc.com/news/articles/c2ewrvkp72lo 

Morningstar. (2025). Is the US Headed for a Recession? What Analysts Are Saying About Q1’s GDP Decline. https://www.morningstar.com/economy/is-us-headed-recession-what-analysts-are-saying-about-q1s-gdp-decline 

The Guardian. (2025). US economy shrinks in first quarter of Trump 2.0 amid sweeping tariffs. https://www.theguardian.com/business/2025/apr/30/economy-gdp-q1-trump-tariffs#:~:text=Gross%20domestic%20product%20(GDP)%2C,two%20quarters%20of%20negative%20growth.