United States

The US economy is expected accelerate in 2026 as policy uncertainty eases, macroeconomic loosening gains traction and AI capex continues to power ahead. The strength of AI spending, notably capex, has surprised on the upside recently. We estimate that AI spending alone contributed more than 25% to US GDP growth in 2025, mostly driven by capex. Besides, the contribution of ICT industries – both manufacturing (computers, semiconductors etc) and services (software and data processing, computer systems design etc) activities – to GDP growth has picked up rapidly. We expect these trends to strengthen a bit through 2026. Moreover, consumer spending has held up well to tariffs and policy uncertainty, despite persistently depressed sentiment recorded in surveys. Tariffs and weak job creation have contributed to the gloom. US households have continued to spend, though much of the spending has stemmed from more wealthy households. While consumer spending is a key downside risk for the outlook, we think that macro easing should help to support spending and labor demand in the quarters ahead. Tax cuts are coming through 2026 from the One Big Beautiful Bill, and there is increasing evidence that the Fed’s easing since September has started to feed through to higher credit creation.  We expect GDP growth to cool though in 2027 on the back of fading euphoria for AI capex and lower equity market valuations.

Corporate bankruptcies have been on a firm upward trend since 2022, though they remain contained relative to historical averages. Persistently elevated funding costs and the tariff-driven rise in input costs have strained some US companies. Consumer backlash against high prices have limited the ability of some corporates to pass on higher input costs on to consumer prices. However, other factors are also at play, including a weak industrial sector overall and changing consumer spending patterns. We expect business bankruptcies to continue increasing in 2026, and to broadly plateau from there. However, solid overall corporate balance sheets (in particular high cash buffers and low debt-to-equity ratios) and good GDP growth should keep them contained.

The US scores relatively well in terms of economic freedom, ranking 26th in the Heritage Foundation’ index. The hallmarks include enforcement of property rights, business and financial freedom and judicial effectiveness. Lower corporate tax rates embedded in the One Big Beautiful Bill Act will further strengthen the US’ position as a good place to do business. On governance, the country is a top performer in terms of regulatory quality and rule of law. However, relative to many peer countries, the US is lagging behind in terms of control of corruption. On sustainability, the US has a low recycling rate and a low share of renewable output compared to peer countries. An area to watch is also the potential reduced effectiveness of government public services following large layoffs as part of the Department of Government Efficiency (DOGE) initiative.