Economic forecasts are a key input to the decision making of central banks and fiscal authorities. They also help guide private-sector investment decisions. Because political decision making is so often influenced by ideology and partisanship, rational people tend to view government economic forecasts with healthy doses of skepticism. This is particularly true when politicians incorporate a government-produced economic forecast assumption into a piece of legislation that has substantial impacts on the economy.
Global growth is expected to slow from 3.2 percent this year to 2.8 percent in 2024 and 2.3 percent in 2025, with a pronounced deceleration in advanced economies. Risks to the outlook are tilted to the downside, including escalating trade barriers and elevated policy uncertainty, higher-than-expected oil prices, surges in violence or social unrest, further declines in official aid, and more frequent extreme weather events.
In the United States, real consumer spending is projected to grow 1.4% this year and accelerate to 2.5% in 2026. Durable goods spending is expected to decline due to higher tariffs and interest rates, while services spending is less impacted by those factors.
A large body of research has demonstrated that nonlinear models can improve the performance of economic forecasts compared to frameworks that take into account only linear effects. Specifically, models that consider seasonal patterns, trends, and volatility can produce forecasts with significantly lower error than those without.