The report card showing how well the US economy is performing as it enters 2026 is complex.
The world’s largest economy appears to be in a strong position by many measures, including by many measures.
Recent growth has outperformed the predictions of the majority of analysts following President Donald Trump’s tumultuous year marked by his return to office and his inclination toward tariffs and protectionism.
Trump praised his economic performance in a speech this month, claiming that the US was experiencing an “likes of the world has never seen” boom.
However, signs of weakness that point to potential risks are hidden within the economic data. Americans are fundamentally pessimistic about their physical condition.
As the year 2025 draws to a close, here are some of the key economic indicators for the US economy:
GDP growth
Gross domestic product (GDP) growth exceeded expectations in the July-September quarter, reaching an annualized 4.3 percent, after a modest expansion in the first half of 2025.
That was the most impressive performance in two years. Additionally, it was significantly ahead of the developed nations like the US.
The economies of the eurozone and the UK both increased by only 2.3 and 1.3 percent annually during the third quarter.
The fourth-largest economy in the world experienced a 2.3% decline during the same time.
Although robust, a number of tech giants, including Microsoft, Amazon, and Alphabet, have largely contributed to the US economy’s growth thanks to multibillion-dollar investments in artificial intelligence.
According to some estimates, spending on AI-related expenses accounted for 40% of total spending in 2025, including all other expenses and growth.
That leaves a lot to be desired, especially if AI can fulfill its untapped potential to transform the economy.
While many analysts think that AI will bring about a fourth industrial revolution, others worry that technology has been overestimated.
According to Campbell Harvey, an economist at Duke University, 2026 might be the year that decentralized financial technologies and artificial intelligence (AI) start to significantly increase productivity.
According to Harvey, “We are in the early stages of technologies like AI that can significantly increase productivity.”
Higher growth is a result. This higher growth from AI has not yet been realized.
Consumer opinion
Americans are generally unsatisfied with the state of their finances despite the US economy being strong on paper. Consumer sentiment is close to historic lows, in fact.
Consumer sentiment was up slightly in December for the University of Michigan’s index, which was 53.3 as of December’s high of inflation, compared to 50 in June 2022, which was at a four-decade high.
Americans are still spending, though.
The fastest rate since the end of 2024 was the increase in consumer spending of 3.5% during the July-September quarter.
The splurge has also not shown any signs of slowing down. Spending increased by 3.9% in the annual report from MasterCard for the holiday season compared to last year.
What causes the disparity between sentiment and spending? wealthy Americans’ and more modestly abled Americans’ fortunes diverge.
According to Moody’s Analytics, the top 10% of earners now account for roughly half of all spending, which is the highest proportion since 1989 when officials began gathering data.
Harvey predicted that Harvey would give the economy a six out of ten overall rating.
“Many people think that the US is stuck with a growth regime of 2% real GDP. Higher growth is a possibility, according to the third quarter. Many people, in my opinion, are too pessimistic. He argued that we require more ambition.
The International Monetary Fund had predicted a 2.7% growth rate at the start of Trump’s presidency, according to Rolf J. Langhammer, a researcher at the German institute for the world economy.
According to Langhammer, “the current strength is clearly lower, essentially 2 percent,”.
US stock market
After experiencing dramatic swings earlier this year with Trump’s tariff announcements, stocks are coming out on top in 2025.
The benchmark S& P 500 has increased by nearly 18%, easily exceeding the benchmark’s 10.5% annual return.
Although the majority of Americans own stocks, wealthier households have benefited disproportionately from the gains.
According to Gallup, household ownership rates range from 87 percent to 28 percent of those earning less than $50, 000.
Inflation
Prices have increased moderately despite concerns that Trump’s tariffs will aggravate inflation, but they are still below the US Federal Reserve’s 2 percent target.
In November, inflation decreased from 3 percent in September to 2.7% year over year.
Americans are still feeling the pinch despite inflation’s recent low of 9.1% in June 2022, when the country’s economy was in a similarly depressing state.
70% of respondents to this month’s PBS News/NPR/Marist poll said the area’s high cost of living was unaffordable.
Some economists have also urged caution against companies that delayed importing goods in anticipation of higher costs.
According to Langhammer, the question was whether or not living expenses would remain constant over the long term.
According to Langhammer, “imports are slowly fading, and the effects of tariffs on inflation are likely to become more obvious in 2026, in addition to the weak dollar,” noting that the average effective tariff rate, 17 percent, was roughly five times higher than it was before Trump took office.
Harvey claimed that the tariffs have had the least impact on the economy.
“In comparison to other nations, the US trade sector is very small. The US is one of the least trade-intensive nations in the world, according to he said, measuring trade intensity as the product of exports plus imports divided by GDP.
You can see that the proportion of imports in terms of GDP is about 14%, which is an additional way of looking at this. I think that the media’s coverage of tariffs is less important than the impact on the economy.
Employment
Despite Trump’s promise to restore US manufacturing excellence, unemployment has steadily increased since January, when he first began his second term.
The official jobless rate increased from 4 percent in January to 4 percent in November, reaching a four-year high of 4.6%.
Trump has attributed the rise to the Department of Government Efficiency (DOGE) of billionaire Elon Musk, but only a small portion of the total number of jobless people are employed.
Source: Aljazeera
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