Summary
This report presents the National Economic Outlook for October 2025, detailing the current economic conditions and forecasts for the upcoming quarters. It outlines the impact of the ongoing government shutdown, which began on October 1st, and its potential effects on economic growth, particularly in Q4. The report highlights the softening labor market, driven by reduced immigration, labor cost cuts, and federal job reductions, predicting subdued job growth through 2026 with an anticipated peak unemployment rate of 4.7%. Despite these challenges, economic activity has shown resilience, supported by AI-related capital expenditures and consumer spending driven by equity market wealth effects. However, the report warns of risks to this outlook, particularly if optimism around AI investment wanes. Additionally, it discusses inflation trends, forecasting core inflation to remain above the Federal Reserve's target at 2.6% in 2026, influenced by tariff-related price pressures. The report concludes with a cautious outlook on growth, projecting a slowdown to 1.7% in 2026.
