UBS(US:UBS)2025-06-23 13:16Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The US economy is expected to experience a slowdown in growth, with real GDP growth projected to decelerate from 3.2% in 2023 to 0.9% in 2025, before slightly recovering to 1.8% in 2027 [4][5] - The unemployment rate is anticipated to rise from 3.8% in 2023 to 4.6% in 2025, peaking at 4.8% in 2026, before slightly declining to 4.7% in 2027 [4] - PCE inflation is projected to increase to 3.3% in 2025, before declining to 2.4% by 2027, while core PCE inflation is expected to follow a similar trend [4] - The Federal Reserve is expected to lower interest rates in response to a weakening labor market, with the federal funds rate projected to decrease from 3.4% in 2025 to 2.9% in 2027 [4][5] Economic Growth Projections - Real GDP growth is forecasted to be 1.3% in 2022, 3.2% in 2023, 2.5% in 2024, 0.9% in 2025, 1.5% in 2026, and 1.8% in 2027 [4] - The anticipated slowdown in growth is attributed to reduced government spending and slower real income growth, alongside significant tariffs impacting trade relationships [5][6] Labor Market Insights - The unemployment rate is projected to rise from 3.6% in 2022 to 4.6% in 2025, with a slight decrease to 4.7% by 2027 [4] - Job gains are expected to average around 130K per month, with potential contractions in the labor market if GDP growth falls below 1.0% [67] Inflation and Tariff Impact - The effective tax rate on imports has increased significantly due to tariffs, which are expected to weigh on economic growth and inflation [6][12] - Core inflation is projected to remain elevated due to tariffs, with expectations that it would be below 2.5% in 2025 without the tariff impacts [93] Fiscal Policy and Government Spending - Fiscal policy is expected to contribute positively to GDP growth in 2023 but will diminish in subsequent years, with a projected deficit widening of $2.3 trillion over ten years due to tax and spending bills [15][95] - Government employment growth is anticipated to slow, with federal hiring already decreasing [100][103] Business Investment Trends - Business fixed investment is expected to soften, with significant uncertainty surrounding tax and trade policies dampening investment intentions [47][61] - Tariffs are likely to increase costs for businesses, making them less competitive internationally [49]