United States: Sideways growth and oil shock risks – TD Securities

TD Securities expects US output growth to move sideways in 2026 as the prior Oil shock lingers and the Iran conflict poses stagflationary risks. GDP is forecast to end 2026 at 2.1% Q4/Q4, with unemployment around 4.2%. The bank assigns a 25% probability to a US recession over the next year.

Sideways growth with stagflation risk

"We expect output growth to move sideways this year, reflecting the lingering impact of the oil shock."

"GDP growth will likely remain slightly below trend in 2026, ending with 2.1% Q4/Q4."

"Stable growth should result in a still-low unemployment rate of 4.2% by Q4 2026."

"The Iran conflict presents stagflationary risks, which we expect will keep the Fed on hold for the entire year."

"We assign a 25% chance to a US recession over the next year."