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TD Securities sees US output growth moving sideways in 2026
The firm expects the Fed to stay on hold through 2026, citing Iran-related oil shock risks alongside higher input costs and stagflation concerns.
TD Securities strategists expect US output growth to move sideways in 2026, with their GDP tracker at 2.5% quarter-on-quarter annualized, and full-year growth slightly below trend at 2.1% Q4/Q4, according to FXStreet. They also project unemployment to remain low, at 4.3% by late 2026.
The outlook hinges on uncertainty from an Iran-related oil shock, which the strategists say could drive stagflationary pressures and recession risks via higher input costs. They argue that these risks, rather than a clear deterioration in activity alone, are likely to keep the Fed on hold for the entire year.
TD Securities adds that AI and high-income consumers are supporting underlying growth, and notes its GDP tracker moved up 0.4 percentage points over the prior week, reflecting an improvement in the middle of Q3 after a weaker July.
On inflation and demand, the strategists expect core PCE to remain within the Fed’s target range, with market-based core PCE contained at 0.13% m/m, and they flag slowing consumer spending after weak retail sales data, with retail spending growth at 0.2% m/m in July.