In brief
President Trump has touted booming growth and rising wages, yet the reality is a mixed picture. GDP is expanding above the IMF forecast, driven in part by a surge in AI data‑center investment. However, import tariffs and a Middle East conflict have pushed inflation above the 3 % level inherited in 2025, squeezing household purchasing power. While the richest percent have benefited from tax cuts, the middle and lower quintiles see modest income gains that barely offset higher living costs. Rising federal deficits are fueling higher borrowing costs, which, in turn, crimp housing affordability and could foreshadow future credit tightening.
1. GDP Growth Beats Forecast
U.S. gross domestic product is expanding at an annualised rate of 2.2 %, as reported by the Department of Commerce. That pace is faster than the International Monetary Fund’s mid‑2026 projection, which had anticipated a slowdown after April tariffs were announced. Growth has risen 3.2 % since the end of 2024, outperforming other G7 economies during the same period.
The acceleration is partly attributed to a boom in artificial‑intelligence infrastructure. Corporate spending on data‑centres swelled to about $5 bn per month in August 2026, almost double the monthly level recorded when Trump first took office.
2. Inflation Surges Amid Tariffs and Conflict
U.S. consumer prices are now 3.7 %, up from 3.0 % at the start of Trump’s second term. The rise is linked to tariffs that have burdened imported goods and to supply‑chain frictions triggered by the Iran conflict, which escalated global energy costs. Last September, diesel prices peaked at $6.52 per gallon, the highest level since 1975.
Key grocery staples, such as beef and coffee, have also climbed in price, while eggs remain cheaper. Retailers warn that higher energy costs could push food prices even higher as production costs increase.
3. Household Incomes Stagnate for Most
After adjusting for inflation, the median household income rose 2.6 % in 2025, reaching $87,460 – the highest level on record. Nonetheless, analyses from the Institute on Taxation and Economic Policy suggest that the middle and lower earnings brackets have effectively earned less today than they would have without Trump’s tax cuts and subsidies that have since expired.
Their estimates indicate that the middle fifth of households are roughly $1,700 worse off in 2026, and the poorest fifth about $750 less. In contrast, the top 1 % enjoy an average gain of $12,560, primarily because of preferential tax treatment.
4. Job Creation Slows but Employment Remains Low
Since returning to the White House, the economy added an average of 34,000 jobs each month, far below the 122,000 jobs added in the final months of the previous administration. Manufacturing employment, the sector Trump promised would swell, sits at 12.6 million in September 2026 – slightly below the level at the start of his term.
The overall unemployment rate is 4.2 %, remaining close to the level it was when Trump assumed office. Immigration restrictions and deportation programs are cited as factors that have reduced the domestic labour supply, easing pressure for new job creation.
5. Borrowing Costs Rise, Threatening Long‑Term Stability
Federal deficit spending topped $2 trillion in the year to September 2026, about 6 % of GDP, and the IMF projects the deficit could exceed 8 % by 2030. The government’s need to borrow has pushed the 10‑year Treasury yield above 5 %, the highest level since 2007, and has increased mortgage rates to 7.4 % for new 30‑year loans.
Higher borrowing costs can dampen consumer confidence, slow housing affordability and, with the rising national debt, could expose the economy to future financial instability, according to IMF warnings.
Data graphics by Erwan Rivault.
