Hard data shows US slowdown, Fitch warns of inflation and weak consumer spending

The US economy is showing signs of an underlying slowdown, Fitch Ratings warned on Wednesday, citing weaker job growth, slowing consumer spending, and inflation pressures from high tariffs.

Fitch said hard economic data now confirms the slowdown, moving beyond previous signals from sentiment surveys.

Fitch highlighted signs of a slowdown in the US. “Evidence of a slowdown in the US is now appearing in the hard data; it’s no longer just in sentiment surveys,” said Brian Coulton, Chief Economist at Fitch. While recent clarity on US tariff policy has reduced uncertainty, Fitch warned that high tariffs will still weigh on global growth and US inflation.


The US economy faces slowing consumer spending, subdued job growth, and the effects of the tariff shock, which has so far limited profit margins but may push inflation higher later this year.

Fitch said, "Higher inflation will dampen real wage growth and weigh on US consumer spending, which has already slowed notably in 2025. Job growth has also decelerated markedly, partly reflecting the impact of the immigration squeeze on labour force growth."

A widening fiscal deficit should support demand in 2026, but Fitch expects the US annual average GDP growth rate to remain well below trend at 1.6% next year.

The agency expects the Federal Reserve to cut rates more quickly than previously anticipated, 25 basis points in September and December, followed by three more in 2026.

The revision reflects upward adjustments for China (4.7% vs 4.2% previously), the eurozone (1.1% vs 0.8%), and the US (1.6% vs 1.5%).

China’s exports have held up despite tariffs, supported by fiscal easing and currency depreciation, though domestic demand is weakening and deflation is becoming entrenched. Eurozone growth is likely to slow in the second half of 2025 as export momentum fades and consumer recovery wanes, although German fiscal easing will provide support next year.

Fitch also noted that long-term government bond yields in the US, UK, Germany, and Japan remain under upward pressure, reflecting ongoing supply concerns.