S&P Global U.S. Forecast Update October 2026

S&P Global has released its October 2026 forecast update for the U.S. economy. The GDP growth forecasts for the next two years were revised up to reflect upward revisions to GDP and disposable personal income data after the annual update and robust September data. Definitional and methodological changes lowered the 2026 PCE inflation forecast, while elevated energy prices keep the 2027 PCE inflation forecast unchanged from the previous forecast.

Treasury yields have reached their highest levels since 2007-08, reflecting a mixture of stronger private demand, higher inflation expectations, and higher uncertainty. S&P Global’s current interpretation, using a model developed and discussed by Federal Reserve economists, is that just under half of the rise in yields in 2026 has been driven by higher expected real short-term rates, or in other words, stronger private demand. A higher real term premium (uncertainty) and higher inflation expectations explain the remainder of the increase in yields.

Real GDP growth is forecast to pick up modestly to 2.4% in 2026 from 2.3% (revised up from 2.1%) in 2025. Real GDP growth is expected to then accelerate to 2.7% in 2027 before moderating to 2.4% in 2028. S&P Global does not forecast any contraction. 

Headline CPI inflation is forecast to rise slightly above previous expectations to reach 3.4% in 2026 due to high energy prices, then ease to 2.4% in 2027 and 2.1% in 2028. It had previously fallen to 2.7% in 2025 from a 2022 spike to 8.0%.

The unemployment rate is forecast to edge down to 4.2% in 2026 before returning to 4.3% in 2027 to 2029. The national unemployment rate picked up in 2024 and rose to 4.3% in 2025, up from sub-4% readings in 2022 to 2023 after peaking at 8.1% in 2020.

Nonfarm payroll job growth is forecast to decelerate to 0.3% in 2026, before edging up to 0.4% in 2027 and 2028. Nonfarm payroll jobs grew 1.2% in 2024 and 0.5% in 2025, compared to the more robust growth previously. 

Housing starts are forecast to edge down to 1.35 million in 2026 before falling to 1.30 million in 2027, as affordability and demographic trends take a toll on the housing market. Starts have been moderating in recent years since the surge to 1.61 million units in 2021. 

The baseline forecast (summarized above) 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.

The current forecast is based on the following assumptions:

• Monetary policy: The Federal Reserve raised the federal funds rate by 25 basis points at the September meeting, in line with expectations. With a healthy labor market and higher energy prices pressuring near-term inflation, the Fed is forecast to raise the policy rate target range by 25 basis points at the December meeting. At the end of next year, the Fed is expected to resume easing, before reaching the long-run “neutral” range of 3.00-3.25% by early 2029.
• Oil prices: Brent crude oil prices were $78 in 2026Q1, and $97 in 2026Q2. They are forecast to average $91 per barrel in 2026, easing modestly to $88 in 2027 and $82 in 2028.
• Federal fiscal policy: 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.
• Population: 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.
• Tariffs and trade: 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 4 percentage points. As a result, the forecast assumes that the effective tariff rate converges to approximately 10%.
• Global outlook: Real foreign GDP was estimated to grow 2.5% in 2025, before slowing to 2.3% (2.2% in prior forecast) in 2026 and rebounding to 2.4% in 2027. Foreign CPI inflation was estimated at 2.4% in 2025 and is expected to accelerate to 2.7% in 2026 and 2027. Foreign sovereign bond yields are projected to average 3.5% over 2026-2027.

Exhibit 1 summarizes the October 2026 forecast from S&P Global. Exhibit 2 shows the September 2026 projections, and Exhibit 3 shows the difference. 

Exhibit 1: S&P Global October 2026 Forecast for the U.S., Over-the-Year Percent Change or Level

Exhibit 2: S&P Global September 2026 Forecast for the U.S., Over-the-Year Percent Change or Level

Exhibit 3: Differences in S&P Global U.S. Projections: October 2026 Versus September 2026 (Percentage Point Differences, Except for Housing Starts)