2027 economic outlook: Steady growth on a winding road

Russell Price, Chief Economist – Ameriprise Financial

November 9, 2026

The U.S. economy appears poised to make steady progress in 2027, but the road ahead has its share of curves. As we enter the final months of 2026, growth remains fairly solid, in our view, even as inflation and higher interest rates create challenges likely to persist well into the new year.

These pressures should slow inflation-adjusted consumer spending over the intermediate term. Still, solid household finances and strong business investment — primarily related to artificial intelligence (AI) initiatives — should help keep the economy moving forward at a sound pace in 2027.

Here’s a closer look at the key factors shaping the economy’s path in 2027.

Inflation: Price pressures could ease in 2027 

Developments related to the situation with Iran have been a key driver of higher prices in recent months, and we expect that to continue into the new year. Overall, we expect headline inflation, as measured by the Consumer Price Index, to end 2026 in a range of 3.5% to 4.0%.

Looking ahead to 2027, inflation rates could slowly ease if the situation with Iran at least stabilizes and West Texas Intermediate crude oil remains in a broad range of $80 to $110/barrel. If that’s the case, we believe the inflation rate could ease to about 2.5% by the middle of 2027. 

Interest rates: Persistent inflation could prompt further Fed hikes 

With inflation likely to remain elevated over the next few months, Federal Reserve officials could implement additional interest rate hikes next year. However, consumer borrowing costs, particularly mortgage rates, have already risen sharply as investors have adjusted to the prospect of persistent inflation. As a result, we do not expect additional Fed action alone to have a material effect on economic growth.

Consumer health: A reliable source of support 

Consumer spending accounts for nearly 70% of U.S. economic activity, and household finances remain a key support for growth. Income and spending are growing at generally sustainable rates, while debt payments also remain manageable.

Still, higher gasoline prices and borrowing costs are putting pressure on household budgets. Larger tax refunds helped offset additional gasoline spending earlier in 2026, but that cushion has largely faded, leaving consumers more exposed to further energy price increases. For 2027, we believe consumer spending will remain a source of economic support, though persistent inflation and higher interest rates could temper its pace.

Corporate health: AI investment fuels growth

We project that business investment should remain an important source of economic support in 2027. Companies have announced billions of dollars in funding for AI initiatives as they pursue potential productivity gains. Although business investment represents a smaller share of the economy than consumer spending, continued AI-related spending could help offset some moderation in household demand. 

Corporate finances offer another source of support. We believe business balance sheets — the assets companies own relative to what they owe — are generally strong, with debt loads low by historical standards. This healthy financial footing should help businesses navigate uncertainty from higher energy prices and interest rates, supporting the broader economic outlook.

Job market: Stable employment despite cautious hiring 

The job market should remain fairly stable, in our view. Companies have remained somewhat cautious in their hiring, but layoffs and job cuts have remained low. And even though consumers aren’t convinced, the data generally shows a favorable labor market, with the unemployment rate standing at 4.2% in September. Overall, through 2027, we expect the unemployment rate to stay within a range of 3.8% to 4.4%.

Eventually, AI initiatives could have a negative impact on overall demand for labor, but at this time, we are seeing limited pockets of such. It’s still very early in the AI investment life cycle, but we believe it will take much more time for businesses to become comfortable regarding what AI can specifically do for their individual business.

Economic growth: Steady expansion expected to continue 

Overall, we’re forecasting real economic growth of about 2.5% for both 2026 and 2027. Continued consumer spending and business investment should support the expansion, although inflation and higher interest rates may limit its pace. 

Key risks to watch 

While the outlook remains sound, several meaningful risks could affect economic growth:

• Energy supply disruptions: Further disruptions to Middle East crude oil supplies could push energy prices higher and weigh on consumer spending.
• Inflation and interest rates: Persistently high inflation could keep interest rates elevated, placing additional pressure on consumers and businesses.
• Trade and geopolitical tensions: Rising trade barriers and broader geopolitical tensions could disrupt economic activity. 

Bottom line 

We expect the U.S. economy to continue expanding in 2027, with inflation-adjusted growth of about 2.5%. Solid household and corporate finances, continued consumer spending and AI-related business investment should help keep growth on track. But the road is unlikely to be straightforward: Persistent inflation, elevated interest rates and energy supply disruptions could weigh on momentum, while trade and geopolitical tensions add uncertainty.

Plan for the road ahead

As you consider what 2027 may bring, connect with your Ameriprise financial advisor. They can help you start the new year with clear priorities and a plan for the road ahead.