Economic Insights: A Deep Dive into Current Trends and Forecasts

The economy is navigating a complex landscape. Growth, inflation, and real estate dynamics are shaping the outlook for the coming years. Drawing from a recent economic analysis, here’s a focused look at the key trends and projections influencing the U.S. and regional economies.

Economic Growth: A Mixed Picture

In the first half of the year, the U.S. economy grew at an annualized rate of approximately 1.5%. However, the first quarter saw negative growth. This was offset by a positive second quarter driven by a swing in imports. Businesses front-loaded to mitigate tariff impacts. Underlying demand, measured by private-sector GDP, is expanding at a modest 1.2% rate.

For the third quarter, estimates vary. The Atlanta Fed projects 3% growth, while Goldman Sachs forecasts a more conservative 1.4%. A balanced estimate suggests growth around 2.3%. This is bolstered by robust AI infrastructure development and a 15% surge in aerospace and defense production. Companies like Boeing are resolving production issues. These sectors, while small, are providing meaningful tailwinds.

Inflation: Persistent but Manageable

Inflation remains a focal point. The latest Consumer Price Index (CPI) data met expectations, avoiding market disappointment. The Producer Price Index (PPI) declined recently, tempering hopes for sharper inflation relief. Tariffs are a significant concern, affecting less than 13% of the economy due to exemptions under the USMCA. This covers trade with Canada and Mexico. Additionally, only about 40% of goods are imported.

Inflation is projected to peak at around 3% by year-end, declining to approximately 2.5% by the end of 2026. Grocery prices illustrate the lingering impact. For instance, $100 spent at a store like Harris Teeter in February 2020 now costs $127.50. Price increases have slowed, but specific items, like English muffins or chocolate chip cookies, have seen sharp rises. This has prompted consumers to rethink purchases. For households earning a median income of about $95,000 or less, essentials—such as food, utilities, housing, transportation, and insurance—consume nearly the entire paycheck.

The primary strategy to combat inflation’s bite is reducing consumption. Relocating to lower-cost housing markets, like the U.S. South, has driven significant migration, with Charlotte benefiting notably.

Monetary Policy: Rate Cuts on the Horizon

The Federal Reserve is expected to cut interest rates two to three times this year. These cuts will likely be by 25 basis points each, rather than the more aggressive 50- or 75-basis-point cuts some anticipate. Interestingly, smaller short-term rate cuts could lead to lower long-term rates. This directly influences mortgage rates, providing relief to borrowers. This cautious approach aims to balance inflation control with economic growth.

Employment: A Significant Revision

Recent data revealed a downward revision of 911,000 jobs added in 2025. This is the most significant adjustment since the financial crisis. It reflects issues like undocumented workers not being counted in covered employment due to ineligibility for unemployment insurance. Overstatements in earlier reports also contributed to this revision.

Since April, monthly job growth has averaged 141,000. However, the revision suggests actual growth may be closer to 65,000 per month. June even showed a net job loss. A single month of declining employment raises recession odds to 50%. Two consecutive months historically signal a recession with near certainty.

Real Estate: Surprising Resilience

Commercial real estate has outperformed expectations. Office vacancy rates, which were expected to rise, have stabilized. Leasing activity is picking up in select markets, such as Charlotte. Commercial property prices, including for offices, are in positive territory year-over-year. This signals an earlier-than-expected recovery.

The commercial real estate cycle peaks every 16 years (1957, 1973, 1989, 2005, 2021). This suggests office construction will bottom out next year, with modest increases by 2027-2028. Charlotte’s compact urban layout gives it an edge over sprawling metros like Atlanta. Positive office space absorption (1.3 million square feet in the past year) and strong apartment demand rank Charlotte second nationally behind Austin.

Regional Spotlight: Charlotte and North Carolina

Charlotte stands out as one of the strongest metropolitan economies. Job growth is at 2.8%, compared to the national 0.9%. The city’s population grew by about 60,000 annually over the past two years. This growth is driven by domestic migration, with 2025 estimates around 65,000. Unlike Raleigh, which faces higher office vacancy challenges, Charlotte’s market is tighter. New projects by Riverside and Crescent are likely moving forward due to limited large office space availability.

The arrival of a private medical school, focused on new surgical techniques and technologies, is attracting companies like Stryker and Siemens. This boosts Charlotte’s appeal as a hub for medical training and innovation. It could spur further hotel development near the medical park. North Carolina as a whole is experiencing robust growth. Wilmington is emerging as the fastest-growing area, driven by retirees and supported by military and aerospace activity. Public infrastructure spending, including $3.5 billion in South Carolina road projects and Charlotte’s rail and highway initiatives, is further fueling regional economic activity.

Tariffs and Global Trade

Tariffs remain a contentious issue. A proposed 15% universal tariff and a 35% tariff on Chinese goods, regardless of origin, are on the table. While these affect a limited portion of the economy, they will increase costs for imported goods such as washing machines and furniture. However, the U.S.’s role in policing global trade lends strategic weight to these measures. There is pushback, such as China redirecting soybean purchases to Brazil. This geopolitical maneuvering is unlikely to disrupt global demand significantly, as supply chains adapt.

Looking Ahead

The economy is on a stable footing. No recession is forecast through 2027. Growth, while moderate, is supported by targeted sectors like AI and aerospace. Regional hubs like Charlotte are capitalizing on migration and infrastructure investments. Inflation, though persistent, is manageable. Strategic rate cuts should provide relief.

However, employment revisions and tariff impacts warrant close monitoring. Businesses and consumers must adapt to these evolving dynamics. For more insights, including weekly economic and regional updates, visit Piedmont Crescent Capital’s website or follow them on LinkedIn for additional commentary.