Heading into 2026, the US economy is increasingly on track for a “stagflation lite” scenario: GDP growth running below the typical 2% trend while inflation remains uncomfortably high. Still, most important economic stories may lie beneath the surface, so RBC Economics explores the five main trends we expect in 2026.
Five key trends
- Stagflation lite will worsen, but the inflation story in 2026 is not just about tariffs. A confluence of factors may create an uncomfortable environment where core inflation is forecasted to stay above 3% year-over-year for most of the year.
- A “new” US consumer is emerging. It should be well appreciated by now that the US consumer is becoming increasingly fragmented.
- The labour market is losing its edge as a leading indicator. It shows tentative signs of weakening—with rising unemployment, slower hiring and sector-specific struggles—though it remains historically tight at 4.4% unemployment.
- AI is driving growth—but not productivity yet. Some are conflating the economic forces of growth with productivity. The AI boom has so far been purely an investment in infrastructure that is boosting current growth.
- Big government will put a floor and ceiling on growth. Looking ahead, 2027 may see larger cuts to government spending, but for now, 2026 is likely to benefit from current spending.
“Structural disruptions to this economic cycle will persist as demographic forces and immigration policy play an increasingly important role in the labour market. At the same time, cyclical tariff disruptions will fade, but not without changing the way businesses and consumers behave.”
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