JPMorgan expects U.S. GDP growth to slow to a crawl over the next two quarters

JPMorgan Chase forecasts a substantial deceleration in U.S. and global economic activity from late 2025 into early 2026, projecting U.S. GDP growth to halve from 2.5% in Q3 2025 to 1.2% in Q4 2025 and Q1 2026. This slowdown is attributed to a weakening labor market and significantly reduced consumer spending, with JPM anticipating only a 0.1% monthly increase in spending, notably below Wall Street consensus, which would pressure purchasing power and broadly impact GDP. Globally, growth is expected to decelerate to 1.5%, a view that contrasts with some more optimistic outlooks from the Atlanta Fed and FOMC.

Analysis

JPMorgan Chase projects a significant economic deceleration for both the U.S. and the global economy heading into late 2025 and early 2026. The firm's forecast anticipates U.S. GDP growth will be halved from a solid 2.5% annualized rate in Q3 2025 to just 1.2% in both Q4 2025 and Q1 2026. This pessimistic outlook is predicated on a weakening labor market, evidenced by stalling employment gains and contracting work hours, and a consequent slowdown in consumer spending. Critically, JPMorgan's forecast for August consumer spending is a mere 0.1% monthly increase, substantially below the 0.5% Wall Street consensus, signaling building pressure on real purchasing power. This view diverges from more optimistic outlooks, including the Atlanta Fed's GDPNow tracker and the FOMC's recently upgraded full-year GDP forecast of 1.6%. Globally, the firm expects growth to downshift to 1.5%. The upcoming personal consumption expenditures report will serve as a key validation point for JPMorgan's thesis, which, if correct, implies a material downside risk to current consensus growth expectations.

Key Decisions for Investors

• Given the forecast for a sharp deceleration in consumer spending, which accounts for over two-thirds of U.S. economic activity, investors should review their exposure to highly cyclical sectors like consumer discretionary and industrials.
• Monitor Friday's personal spending data closely; a reading near JPMorgan's 0.1% forecast, versus the 0.5% consensus, would validate the bearish thesis and could trigger a negative repricing of growth-sensitive assets.
• It may be prudent to re-evaluate 2025-2026 earnings models, as a GDP slowdown to 1.2% would imply a more challenging revenue environment than many current market estimates reflect, potentially warranting a shift toward more defensive positioning.