Economic and financial risk insights:
Stronger growth in US and China amid lingering US inflation and policy uncertainty
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We raise our US real GDP growth forecast to 2.5% from 2% for 2026, and to 2.1% from 1.9% for 2027. Our 2026 revision is driven by strong consumer spending, as a mechanical rebound from the 4Q25 government shutdown and large tax refunds fuel a strong 1H26 fiscal impulse.
We also raise China's real GDP growth forecast to 4.7% from 4.5% for 2026, and to 4.3% from 4.2% for 2027. This revision reflects China's greater resilience to external headwinds than previously assumed. Wider Asia is also showing reduced sensitivity to US-driven policy shocks, due to more regionally concentrated supply chains and intra-Asia demand.
Our slight forecast reduction for euro area growth from 1.3% to 1.2% in 2026 reflects last year's stronger base rather than a worsening outlook. Emerging evidence suggests an acceleration in underlying demand-driven sequential growth, carried by Germany's fiscal expansion.