US Economic Outlook by Components: Q2 2025

Tariff Impact, Trade War, Market Volatility, Business Uncertainty, Recession Risk, and Rebounding Inflation.

These phrases have dominated recent US business and economy news headlines.

Economists have been revising their US GDP growth forecasts downward and raising the probability of a recession. They expect Inflation to rise again as the cost of imported goods increases and retailers pass these costs on to consumers. We expect both businesses and consumers to slow spending until the cloud of uncertainty around trade policy clears.

How we see GDP components evolving

To monitor economic activity, we continue to examine GDP growth through its major components, along with a few key economic indicators. Our analysis considers both historical trends and forward-looking projections for the coming quarters and years. Following is a summary of GDP and its component trends:

• Nominal GDP: Nominal GDP: US nominal GDP reached $29.2 trillion in 2024. US consumer spending, also known as personal consumption expenditures (PCE), is the largest component of GDP, totaling $19.8 trillion and accounting for 68% of GDP in 2024. US business spending, also referred to as fixed investments in non-residential and residential assets, totaled $5.3 trillion. In 2024, US exports of goods and services reached $3.2 trillion, while imports totaled $4.1 trillion. Government consumption expenditures and gross investments reached $5.0 trillion (see figure below).
• Real GDP Growth: Real GDP, which strips out the effects of inflation, is the key metric that economists use to assess true economic growth. Real GDP in the US grew by 2.8% in 2024. Current consensus forecasts project real GDP growth of 1.4% in 2025.
• Consumer Spending Growth: US PCE grew by 2.8% in 2024, and the consensus forecast for 2025 is 2.3%. The growth in real consumer spending on services has outpaced growth in spending on goods for the past three years, and this trend will likely continue in 2025.
• Business Spending Growth: Business investments in assets to support future production is another critical driver of GDP. Real business spending grew by 4.0% in 2024. Economists currently forecast 1.6% growth in 2025 as businesses delay investment decisions due to trade policy uncertainties.
• Exports and Imports Growth: Net exports (exports minus imports) are a key part of GDP calculation. When exports exceed imports, the result is a positive contribution to GDP. Consensus expectations for 2025 point to 2.0% growth in real exports (down from 3.3% in 2024), and 3.3% growth in real imports (down from 5.3% last year).
• Government Spending Growth: Real government spending grew by 3.4% in 2024, and current projections suggest 1.9% growth in 2025.

Forrester Clients: To help you navigate this uncertain environment, we will continue to publish quarterly insights on the US economy, what it means for your business, and how best to prepare. Please see our recently-published report, “US Economy Trends and Outlook, Q2 2025“, and reach out with any questions or schedule a guidance session. Please also check out this page to explore our research on how to lead through volatility.