Our forecast implies at 2.2% increase in U.S. gross domestic product for the first quarter, driven by nonresidential investment, consumption and government spending, when the Bureau of Economic Analysis releases the data on Thursday.
Residential investment and net exports figure to provide a large drag on the first estimate of the quarter’s GDP.
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Before the war in the Middle East, we expected growth for 2026 to expand at an above-trend 2.4%. But because of the supply shock that ensued, we have reduced our 2026 forecast to 1.7% with risk of a slower pace of expansion should the war continue.
Currently, we think that there is a 30% probability of recession over the next 12 months.
Our expectation is that with large tech companies expected to increase AI-related investment by half a trillion dollars this year, the nonresidential investment category will capture the start of another robust year of capital expenditures and construction.
While nominal spending has remained stout, on an inflation-adjusted basis we anticipate a modest boost to growth of 1.7% during the first three months of the year.
The swing factor will be inventory accumulation, which we think will provide a modest boost to GDP.
