At the national level, gross domestic product performance in the first half of 2025 has been mixed.

The first quarter registered a contraction of –0.5% (annualized), largely the result of firms pulling forward imports in anticipation of tariffs as I discussed in the July month-end report.

That negative quarter understandably raised fears of a recession. However, the second quarter rebounded, aided by normalization in imports and exports.

Given these developments, I have modestly revised upward my GDP forecasts for 2025 (1.4%) and 2026 (1%). While these are historically low growth rates and risks remain, I now anticipate that if a recession does occur, it will likely be mild, barring an unexpected shock.

Two policy levers provide buffers: The Federal Reserve has room to reduce interest

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