Weekly Economic Report 6.27.25

Uncertainty about government policy has cooled economic growth in recent months, as reflected in weaker GDP growth in the first half of 2025 and a modestly rising unemployment rate. We are comforted that the slowdown has been so mild, with real GDP growth rebounding to a 2.9% annual rate in the second quarter (as estimated by GDPNow) after a trade induced -0.5% slump in the first quarter. Still the 1.2% average over the first half is well short of the relatively stable 2.8% growth rate enjoyed in the previous ten quarters. Early in 2025, weather and fires may have helped depress first quarter numbers, but that temporary weakness was likely resolved by May. Rather it is the decrease in immigration and imposition of tariffs which are likely equally to blame for business and consumer caution. Some drag from these policies was always anticipated – and expected to be offset by stimulus from new and sustained tax cuts as well as the positive effects of deregulation. Unfortunately, the one big beautiful bill does not include the 15% corporate tax rate many hoped for and fresh stimulus is limited – though front loaded with a larger deficit expected in FY 2026.

EU06-27-2025.pdf

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