The upgrade comes from a simple place: people are spending, and businesses are investing. That combination tends to move the needle.
Consumer spending is doing the heavy lifting, but it is not alone. Private investment, especially in AI-related projects, is also picking up steam.
"Tech/AI related investment is the main factor driving higher business capex, while high-income household spending is responsible for the majority of consumer spending growth," said James Knightley, ING's chief international economist.
The size of that AI push is staggering. For context, that is more than some countries' entire annual economic output.
To put that in perspective, the projected AI spending alone would rival the total GDP of many advanced economies, highlighting how deeply the tech sector now shapes American growth. Meanwhile, the resilience of high-income households - supported by steady wages and rising asset values - continues to anchor consumer demand.
Looking further out, quarterly GDP forecasts through end-2027 stay steady, ranging from 2% to 2.2%. So the boost is mostly about the near term, not a fundamental shift in the economy's speed.
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Here is where things get a bit trickier. Inflation is cooling, but slowly.
Core PCE inflation eases to 2.5% in 2027, still above the Fed's 2% target.
In other words, do not hold your breath for rate cuts anytime soon.
Knightley noted that "cooler jobs and inflation data and a sense the new Fed chair was less inclined to raise rates has seen pricing become less aggressive, with a September hike now seen as less than a 50% call." So the risk of a hike is fading, but the door is not exactly closed.
The jobs picture is also softening. Monthly payroll growth forecasts for 2026 were cut to 66,000, with similar gains expected in 2027. That is still job creation, just at a slower clip than the red-hot pace of recent years.
No forecast comes without caveats. The biggest one on the table is an escalation of the Iran war.
If that happens, oil prices could jump, pushing consumer prices higher and eating into growth. It is the kind of shock that can derail even the most carefully built projections.
The survey, conducted Aug. 14-19, included up to 85 economists. That is a solid sample size, giving the numbers some weight.
The survey's findings point to an economy with two distinct speeds: near-term strength powered by consumers and AI investment, and a slower underlying trend weighed down by elevated inflation and cooling job gains. That split helps explain why the Fed is expected to leave rates alone for an extended stretch and why forecasters did not lift their outlook for the years beyond.
The bottom line? The US economy looks healthier than expected right now, thanks to consumers and the AI boom. But with inflation running above target and geopolitical risks lurking, the path forward is far from smooth. For your portfolio, that suggests staying alert rather than making big bets on a clear direction.
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