By Tom Ozimek

The U.S. economy is outperforming earlier expectations this year as surging tech sector investment and a rush of pre-tariff imports bolstered activity, helping offset the drag from cooling job growth and moderating household spending, the Organization for Economic Cooperation and Development (OECD) said on Dec. 2 as it raised its U.S. growth forecast.

In its latest Economic Outlook report issued on Tuesday, the 38-country group said it now expects the U.S. economy to grow 2 percent in 2025, up from the 1.6 percent it projected in June.

The upgrade reflects a year in which investment in information processing equipment, software, and data center construction surged at exceptional rates, providing an economic buffer even as higher tariffs, lower net immigration, and a late-year government shutdown weighed on demand.

The OECD also lifted its global forecast, now seeing the world economy expanding 3.2 percent this year—down slightly from 3.3 percent in 2024, but exceeding the 2.9 percent pace it estimated six months ago. Growth is expected to slip to 2.9 percent in 2026 as the full tariff impact works through household budgets, business outlays, and global trade.

“The global economy has been resilient this year, despite concerns about a sharper slowdown in the wake of higher trade barriers and significant policy uncertainty,” OECD Secretary-General Mathias Cormann wrote, while projecting that tariffs will gradually feed through to higher prices, weighing on consumption and private investment.

Business Investment Drives U.S. Outperformance

The OECD said the United States is outperforming other advanced economies largely because of exceptionally strong investment in information and communication technology (ICT) and artificial intelligence (AI), which has become a key engine of growth in 2025.

Private ICT equipment investment as a share of gross domestic product (GDP) has risen sharply, the report said, with U.S. spending levels now roughly 20 times those of countries such as the United Kingdom and Canada.

ICT equipment and software investment made an unusually large contribution to real GDP in the first half of the year, which grew at a 1.1 percent annualized pace through the first six months of 2025 despite “rapidly cooling job growth and numerous headwinds.”

Excluding AI-related investment—which the report said “continued to boom”—GDP would have slipped 0.1 percent over the period, highlighting the extent to which tech spending has propped up overall output.

The boom extends beyond equipment. Investment in data center construction jumped at an annualized 21 percent pace in the first half of 2025, accounting for more than 5 percent of all nonresidential construction.

The United States—already home to 43 percent of global installed data center capacity in 2024—is widening that lead as companies accelerate the deployment of AI technologies.

“Strong demand for new AI-related investments in some countries, particularly the United States, are all providing broader support for demand, offsetting headwinds stemming from the gradual implementation of new trade policy barriers, still-elevated policy uncertainty, and declining residential investment,” the OECD said.

Consumption Slows, but Economy Holds Up

Private consumption in the United States has cooled noticeably since 2024 as higher tariffs pushed up prices on imported goods and slower population growth softened household spending.

The OECD said the recent federal government shutdown also created temporary fourth-quarter weakness that should partially reverse in early 2026. Still, buoyant equity markets have delivered wealth gains for many, cushioning the pullback in spending.

Front-loading also played a significant role. The anticipation of higher tariffs triggered a rush of imports early in the year, boosting industrial activity and keeping supply chains humming through mid-2025 even as trade barriers rose.

The OECD said the effective legislated tariff rate in the United States has climbed from 2.5 percent to 14 percent since the start of 2025, though the observed tariff rate—calculated from customs duties as a share of import values—stood at 10.1 percent through August, suggesting the full impact has yet to be felt.

The pass-through of tariff increases to consumer prices has been “relatively muted” so far, according to the report, suggesting that firms have absorbed part of the shock.

While import values for tariffed goods have “fallen significantly” since the duties took effect, overall activity has remained “fairly resilient” through mid-2025.

The U.S. outlook is shaped by a mix of solid investment and a fiscal stance the OECD described as “unsustainable.” The federal deficit is projected to remain near 7.5 percent of GDP despite new tariff revenues and cuts to non-defense discretionary spending, as outlays tied to the One Big Beautiful Bill Act and slower economic growth offset savings elsewhere.

Monetary policy easing is expected to resume in 2026 as labor-market risks rise and inflation pressures stabilize. The OECD anticipates the federal funds rate will gradually decline to a 3.25–3.5 percent range by late 2026, provided inflation shows signs of returning to target and employment does not weaken abruptly.

Risks to the U.S. growth outlook are “tilted to the downside,” the report said, citing the possibility of a sharp correction in equity markets—where valuations have been buoyed by expectations of high returns from AI investment—as well as potential credit tightening in the shadow-banking sector.

Inflation could also prove more persistent than assumed, and the labor market could be weaker than anticipated.

On the upside, the OECD said continued advances in AI, further on-shoring of manufacturing capacity, or more resilient household spending could boost growth above baseline projections. It added that bottlenecks in housing and infrastructure, as well as persistent labor shortages in key industries, remain structural constraints on long-term U.S. output.

The OECD expects the U.S. economy to grow at a 2 percent pace in 2025 and 1.7 percent in 2026, before picking up to 1.9 percent in 2027.