US growth remains resilient despite successive shocks. According to our forecasts, it is expected to reach 2.2% in 2026 and 2.3% in 2027. Its main driver is still investment in artificial intelligence (AI), which has remained entirely unaffected by the energy crisis. The labour market has seen a marked improvement in job creation and a fall in the unemployment rate. Core inflation remains stubbornly high and above the Federal Reserve (Fed)’s target. Against this backdrop, the Fed has begun a hiking cycle in September, which, according to our scenario, would bring the Fed Funds target to 4.50% (upper limit) by Q1 2027. At the same time, long-term rates are under upward pressure.
The energy shock is not holding back growth
Driven by AI-related investment, US growth is holding up despite rising energy inflation. We forecast GDP growth at 2.2% in 2026 and 2.3% in 2027 on an annual average basis. The AI-related investment cycle[1](+14.8% y/y in H1 2026) is expected to continue, accompanied by potential productivity gains. However, other private-investment segments (including residential property) remain sluggish. In addition, the rising cost of capital could accentuate its ‘K-shaped’ profile. Household consumption is expected, on the whole, to benefit from the rebound in job creation and to remain above 2% y/y through to the end of 2027. In H1 2026, it held up against resurging inflation due to an average year-on-year increase of 11.5% in tax refunds and a savings rate standing at its lowest level since 2022 (2.8% in Q2).
Growth and inflationRecord capital-raising driven by AI
This year, AI-related investments are driving massive capital-raising by companies through loans, bond issues or share placements. This trend is set to continue given the seemingly colossal scale of the funding requirements, even as risk premia in the bond market begin to widen. According to their statements, the five tech giants could invest nearly USD 900 bn this year and over USD 1,000 bn next year – more than double the figure for 2025. Spurred on by regulatory easing, the major US banks have announced that they will mobilise significant resources to support projects considered strategic for the United States (AI, defence, energy and infrastructure). While funding for the AI boom appears unaffected by rising long-term interest rates, these latter are likely to continue to weigh on household demand for mortgages. Since the start of the conflict in the Middle East, 30-year mortgage rates have risen by 78 bp (to 6.76% at the start of September). Conversely, consumer lending remained buoyant in H1 2026 and is supporting household spending.
Two-speed growth in industry
Industrial production rebounded slightly in 2025 (+1.1%), driven by AI and aerospace. We forecast an acceleration to +1.5% in 2026 and +2% in 2027. Investment in AI is bolstering the electronics sector, while the (civil and military) aerospace sector is rebounding as order backlogs are cleared and defence requirements rise. Conversely, sectors exposed to rising tariffs (in particular, the steel, aluminium and automotive sectors) are still on the back burner, contrary to the objective of these measures. This positive momentum in industrial production, while concentrated, is expected to continue, bolstered by the recovery in business sentiment. The ISM Manufacturing Index has been in expansionary territory since early 2026, despite ongoing pressures on prices and supply chains.
Industrial production is being driven by the AI cycle and the aerospace sector
Labour market: a low unemployment rate on a downward trend
Job creation (non-farm payrolls) has rebounded, averaging +80,000 per month since the start of the year, compared with +10,000 in 2025. This growth is no longer limited to the healthcare sector. Excluding healthcare, job creation is up by an average of +38,000 in 2026, compared with -47,000 in 2025. Manufacturing and construction, two sectors driven by AI, are contributing to this rebound. At the same time, the labour force has not grown since January 2025 due to the decline in the foreign-born workforce (down 4.2% cumulatively over the period). Excluding the impact of COVID-19, the labour force participation rate is at its lowest level since the 1970s, standing at around 61.5%. The rebound in labour demand and persistent pressure on the labour supply have brought the unemployment rate down to 4.1% in August 2026 (a 0.3pp fall since the start of the year). The jobless rate is expected to fall to 3.9% at the end of 2027 (4.2% corresponds to full employment, according to the CBO) thanks to a job creation rate of around 40,000–60,000 per month.
Inflation: structurally above target
The rise in oil prices has triggered a rebound in CPI inflation. The contribution from the energy component (+1.2 pp) largely accounts for the rise in inflation since February. A slowdown was seen (from +4.2% to +3.4% y/y) between the May peak and August. This is expected to continue due to base effects on energy prices. We anticipate the trough to be +1.8% y/y in Q2 2027 before a stabilisation at around +2.3% y/y later in the year.
Meanwhile, core inflation is expected to remain above the Fed’s 2% target, and above +2.5% y/y in 2027. This highlights the structural nature of inflation, beyond short-term fluctuations linked to energy. Non-housing services are expected to show significant inertia, with inflation hovering at around +3% y/y by the end of 2027. The potential for disinflation also appears limited for housing-related services, as the rise in rents shows no signs of abating. Finally, inflation on non-energy goods is slowing as the effects of tariffs fade. However, the AI cycle is exerting upward pressure through the general rise in the cost of electronic goods.
Fed: green light for rate hikes
The FOMC has embarked on a cycle of rate increases. The Fed Funds target was raised to 4.0% (+25 bp) at the September meeting, and we anticipate two further rises that would bring the policy rate to 4.5% in January 2027. These three rises (made possible by reassuring developments in employment and economic activity) are intended to reverse the three cuts in 2025 adopted to counter the ‘downside risks’ to the labour market at that time. As a result, the committee can recalibrate its policy towards ‘price stability’ and, through its interest rate decisions, reflect the priority given to this objective in its communications. The risks point towards further monetary tightening: in our baseline scenario, core inflation would remain sticky and the fall in unemployment would give the FOMC room for manoeuvre to raise rates further.
Public finances: underlying deterioration and pressure on long-term rates
According to our estimates, the federal deficit is set to widen by 0.7 pp to -6.6% of GDP in 2026 (by 0.4 pp to -3.1% for the primary deficit), weighed down by falling tariff revenue (refunds of tariffs already collected and lower-than-expected receipts). In 2027, the end of this one-off effect is expected to lead to a marginal improvement to -6.3% (to -2.8% for the primary deficit). The growing burden of interest payments (3.5% of GDP in 2026 and 3.6% in 2027, following 3.2% in 2025) and the conflict in Iran (affecting the military budget) are weighing on the budget balance and federal-debt dynamics. Federal debt is still on an upward trend, with no particular change in direction, exceeding 100% of GDP (101.9%, up 3.3 pp, in 2026, and 103.5% in 2027). It is expected to reach 110% by the end of the decade against a backdrop of budget deficits of close to 6% of GDP, assuming fiscal policy remains unchanged.
Furthermore, the mid-term elections (which see the entire House of Representatives and one-third of the Senate up for re-election) could result in a divided Congress or in both chambers changing hands to the Democratic Party. Should the former occur, this would increase the risk of a legislative deadlock, while the presidential veto would limit the Democrats’ ability to influence fiscal policy in the latter scenario.
Against this backdrop, pressure on the bond market is likely to continue in the coming months. Treasury issuance is rising, fuelled by increasing spending requirements (in areas such as AI, defence and supply chains). At the same time, shifts in investor demographics are increasing demand volatility, and issuances by companies in the artificial intelligence sector are intensifying competition for capital. We anticipate a 10-year yield of 4.95% in Q1 2027, before a slight easing brought about by Fed rate rises, which would lend credibility to the price-stability objective. However, according to our forecast, 10-year yield is expected to remain close to a 20-year high, at 4.80% in Q4 2027.
The US relies on imports for its growth
The US trade deficit has recently started to rise again. According to our forecasts, it is expected to account for the same proportion of GDP in 2026 as it did in 2024 (4.4%). This trend is driven by imports of AI-related capital goods, which are set to rise from 1.2% to 2.1% of GDP between 2022 and 2026. Investment in AI is, in fact, import-intensive (Chart 3), which dampens its positive impact on growth and highlights the US’s dependence on foreign supplies in a cycle that it is nevertheless spearheading.
AI-related imports are growing faster than associated investmentThe additional tariffs have failed to reverse the trend in the trade deficit. Furthermore, the IEEPA tariffs struck down by the Supreme Court were replaced, in July 2026, by ‘Section 301’ tariffs (forced labour) ranging from 10% to 12.5%. These tariffs target 60 countries and have been introduced on top of existing sector-specific tariffs (steel, aluminium and automotive). Following these adjustments, the statutory rate (measured against the 2024 import structure) remained slightly above 10%. The main risks relate to potential new sector-specific tariffs and the renegotiation of the USMCA.
