U.S. economic growth prospects have been revised upward following the release of delayed data linked to last year’s federal government shutdown, prompting Fitch Ratings to adjust its forecasts for both 2025 and 2026.
In its latest assessment, the ratings agency now estimates that the U.S. economy expanded by 2.1 percent in 2025, up from the 1.8 percent projection outlined in its December Global Economic Outlook. Fitch has also marginally raised its growth forecast for 2026 to 2.0 percent from the previous estimate of 1.9 percent.
The revision reflects stronger-than-expected performance in the third quarter of 2025, when gross domestic product grew by 1.1 percent on a quarter-on-quarter basis. The upside surprise was driven largely by resilient consumer spending, higher government expenditure, and an improved contribution from net trade.
While private investment growth lagged earlier expectations, spending on information technology remained robust. IT-related investment expanded by 14 percent year on year and continues to play a critical role in supporting overall economic output.
Household consumption proved particularly resilient, rising by 0.9 percent in the third quarter of 2025. This strength persisted despite a slowdown in real income growth over the course of the year, as labour market momentum softened and employment growth decelerated.
Fitch analysts noted that buoyant equity markets have helped sustain consumer confidence and spending patterns. At the same time, households appear to be drawing more heavily on savings to support consumption. The personal saving rate declined from 5.1 percent of disposable income in January 2025 to 4.0 percent by September.
Interpreting recent inflation trends has been challenging due to incomplete consumer price data for October. However, Fitch estimates that inflation accelerated to 3.0 percent in December 2025, up from 2.7 percent in November.
The agency expects inflationary pressures to persist into 2026, largely reflecting delayed pass-through effects from tariffs. Under its baseline scenario, inflation is projected to rise further before ending 2026 at approximately 3.2 percent.
Labour market conditions are expected to remain relatively stable. Fitch forecasts that U.S. unemployment will average around 4.6 percent in 2026, broadly in line with recent outcomes. The impact of slower job creation is expected to be partially offset by a moderation in labour force growth.
On the monetary policy front, Fitch anticipates a cautious easing cycle by the Federal Reserve. The agency expects two interest rate cuts in the first half of 2026, which would lower the upper bound of the federal funds rate to 3.25 percent.
The revised outlook underscores the U.S. economy’s capacity to maintain moderate growth despite tighter financial conditions, easing labour market momentum, and evolving inflation dynamics heading into 2026.
