A economic forecast is an assessment of the current state and future trends in a country’s or region’s economy. These estimates are based on a variety of macroeconomic indicators, such as GDP growth rates. Economic forecasts are used by business managers and financial institutions to guide investment and spending decisions. Business forecasts are also important for the development of policies that affect aggregate economic activity, such as monetary policy and tax rates. Some organizations have in-house economists to focus on economic forecasts relevant to their operations, while others rely on academic or Wall Street analysts, think tanks, boutique consultants, and international institutions.
During 2024, we saw consumer spending decelerating in response to higher interest rates and the impact of tariffs on prices and production costs. We now expect that a similar dynamic will slow household spending in 2025, with higher rates of delinquency on credit cards and auto loans inhibiting demand. We expect that businesses will pass on some of the cost of increased tariffs to consumers, further restraining consumption. We are also seeing a decline in investment, which is typically more cyclical and is in part incentivized by government policies like lower taxes or subsidized borrowing.
Globally, our baseline forecast is for growth to slow to around 3.0 percent in both 2024 and 2025, with advanced economies experiencing particularly pronounced weakness. Global headline inflation is expected to fall from its recent highs as commodity prices decline, with underlying (core) inflation declining more gradually.
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