Our economic outlook for the United States

Growth continues to demonstrate resilience, with activity tracking at a pace consistent with an economy expanding above 2%. Business investment remains a notable source of strength. Investment ran at a 9.6% pace through the second quarter, exceeding our strong expectations coming into the year by over 2 percentage points. We expect this capital expenditure cycle to remain an important contributor to growth through 2027. Consumer spending is also evolving broadly in line with expectations, supported by tax policy tailwinds and the continued benefits of elevated household wealth. Softer real income growth presents a potential headwind to consumption during the second half of the year.

The labor market remains fundamentally stable, with a broad range of indicators suggesting conditions remain close to neutral and consistent with overall health. We believe that the August employment report of 162,000 jobs created was stronger than underlying conditions suggest, but it did reinforce our view that cyclical labor conditions have improved modestly over the last few months. We have revised our year-end unemployment rate forecast down from 4.6% to 4.4%. We attribute about half the decline in the unemployment rate since November 2025 to the noncitizen labor force, a group that represents about 10% of the overall U.S. labor force. Immigration policy and declining noncitizen survey response rates are among the reasons for the drop.

Inflation continues to be distorted by measurement issues and temporary factors; however, underlying price pressures appear to be stuck in a range just below 3%. The Federal Reserve raised its policy rate by a quarter percentage point at its September 16 meeting. We anticipate another rate hike by year-end, which we view as a recalibration of policy and the removal of prior accommodation rather than the start of a more sustained tightening cycle at this point.