S&P Global U.S. Forecast Update May 2026
Tight oil supply gives way to higher inflation
S&P Global have released their May 2026 forecast update for the U.S. The current forecast is based on the following assumptions:
- The forecast includes the direct effects of the partial government shutdown that ended November 12, 2025, and the One Big Beautiful Bill Act (OBBBA), which indefinitely extends cuts to marginal personal tax rates enacted in the 2017 Tax Cuts and Jobs Act and adds new deductions for tip income and overtime pay, among other personal tax provisions. The OBBBA includes increased federal direct spending but reduces outlays for Medicaid, ACA insurance premium tax credits, and SNAP benefits. It also introduces new expensing provisions and expanded deductions for businesses and corporations, while rescinding most of the clean-energy tax credits introduced by the Inflation Reduction Act.
- This forecast incorporates the existing Section 232 tariffs, along with new Section 232 tariffs of 10% on critical minerals effective in the first quarter of 2027. In the forecast, the replacement of the IEEPA tariffs with Section 122 tariffs lowers the effective statutory tariff rate by about four percentage points. As a result, the forecast assumes that the effective tariff rate converges to approximately 10%.
- Deportations, combined with a sharply reduced inflow of immigrants, will lower U.S. aggregate supply and aggregate demand. This forecast assumes net international migration will be reduced, relative to Census projections, by roughly 500,000 per year over the four years of the Trump presidency.
- Unspent pandemic-era funds, as well as monies authorized under the Infrastructure Investment & Jobs Act (IIJA), mitigated pressures to reduce state and local government spending. States generally remain fiscally sound and are expected to take on a larger share of Medicaid benefits as federal spending is reduced.
- The Fed left rates unchanged at the April meeting, in line with expectations. With core inflation higher and labor markets in line with last month’s forecast, the Fed is expected to pause until June 2027. The Fed reaches the long-run “neutral” range of 3.00-3.25% in December 2027.
- Real foreign GDP grew 2.1% in 2024 and is estimated at 2.5% in 2025. Growth is expected to slow to 1.9% in 2026 before rebounding to 2.3% in 2027. Foreign CPI inflation was estimated at 2.3% in 2025 and is expected to jump to 2.9% in 2026 before easing to 2.6% in 2027. Foreign sovereign bond yields are projected to average 3.3% in 2026 and 2027.
- Brent crude oil prices rose to $113 per barrel in the second quarter of 2022, up from $80 in the fourth quarter of 2021. Prices were estimated at $69 in 2025 and are forecast to rise to an average of $121 in the third quarter of 2026, before easing to an average of $87 by the end of 2027.
The baseline forecast (summarized here) is assigned a 50% probability. The pessimistic scenario is assigned 25%, and the optimistic scenario is assigned the remaining 25%. These probabilities are unchanged from the prior forecast.
After increasing by 2.9% in 2023 and 2.8% in 2024, the baseline forecast calls for real GDP growth to drop to 2.1% in 2025 and 1.9% in 2026, then moderate to 1.8% in 2027. On a quarterly basis, the forecast calls for real GDP to increase through 2036 (no recession).
Headline inflation spiked in 2022 to 8.0%, then decelerated to 4.1% in 2023 and 3.0% in 2024. It is forecast to fall further to 2.7% in 2025, rise to 4.0% in 2026, then fall to 2.5% in 2027.
The unemployment rate peaked at 8.1% in 2020 but fell to 5.4% in 2021 and again to 3.6% in 2022. It remained at 3.6% in 2023 and rose to 4.0% in 2024. Unemployment is forecast to rise to 4.3% in 2025, 4.5% in 2026, and 4.8% in 2027 before gradually decreasing.
Nonfarm payroll jobs nationally dropped by 5.8% in 2020 but rebounded with growth of 2.9% in 2021 and 4.3% in 2022. Jobs rose by 2.2% in 2023 and slowed to 1.2% in 2024. Job growth is forecast to slow further to 0.5% in 2025 and 0.2% in 2026.
Housing starts surged in 2021 to 1.61 million units. Activity remained strong in 2022 at 1.55 million. Starts fell to 1.42 million in 2023 and 1.37 million in 2024. They are forecast to fall to 1.36 million in 2025, 1.35 million in 2026, and 1.30 million in 2027, as high interest rates and inflation take a toll on housing activity.
Exhibit 1 summarizes the May 2026 forecast from S&P Global. Exhibit 2 shows the April 2026 projections, and Exhibit 3 shows the difference.
Exhibit 1: S&P Global May 2026 Forecast for the U.S., Over-the-Year Percent Change or Level
Exhibit 2: S&P Global April 2026 Forecast for the U.S., Over-the-Year Percent Change or Level
Exhibit 3: Differences in S&P Global U.S. Projections: May 2026 Versus April 2026 (Percentage Point Differences, Except for Housing Starts)
