What is the Economic Outlook for 2025 and Beyond? Key Insights for your Business from ITR Economics
Published on by Matt Rosen in Construction, Manufacturing, Advisory, Wholesale / Distribution, Professional Firms, Real Estate

The forces driving the global economy are increasingly complex, shaped by evolving inflation trends, demographic shifts, and fiscal policies that promise to influence growth trajectories in the United States and globally. In this exclusive virtual event presented by Barnes Dennig, Huntington Bank, and Frost Brown Todd, Connor Lokar, senior forecaster at ITR Economics, provided an in-depth analysis on the post-presidential election economy. Here, we break down his forecasts and insights into several critical themes expected to influence the economy in 2025 and beyond.
Inflation and Interest Rates
Persistent Inflation – Lokar highlighted that while inflation rates have eased, the outlook remains volatile. Following unprecedented stimulus and government spending, inflationary pressures are likely to persist through 2025 and into 2026. Lokar pointed to the U.S. Treasury’s recent debt issuance levels, which reached $28.4 trillion over 12 months. This borrowing trend, as Lokar put it, “is the inflation tinder going onto the fire,” suggesting that inflation rates will increase to around 3% by late 2025, rising above 3% in 2026.
Interest Rate Climb – With higher inflation on the horizon, Lokar warned that interest rates would likely “ladder up” progressively over the decade. The forecast includes a potential yield on the 10-year Treasury nearing as high as 8% by 2028, reflecting a shift away from historically low rates. Lokar emphasized the importance of businesses securing necessary debt sooner rather than later to avoid higher borrowing costs.
Industrial and Manufacturing Outlook
Labor Market Dynamics – A structural labor shortage continues to impact industrial and manufacturing sectors. Lokar noted that the U.S. labor market has only “eased up” slightly, with fewer than one person available per job opening. The current labor shortage complicates hiring efforts, putting upward pressure on wages and adding to production costs. He recommended leveraging temporary slack in the labor market, as the broader trend points to long-term constraints in labor availability.
Demand and Supply Chain Pressures – Manufacturing has slowed, and Lokar noted a “cooling” trend in physical goods demand, particularly in the U.S. and Europe. Despite a global supply chain recovery post-COVID, rising commodity and energy demands next year are expected to apply upward pressure to supply chains once more. Lokar predicts these factors will feed into inflation, especially as industrial production ramps up.
Real Estate and Construction Projections
Multifamily and Commercial Real Estate Challenges – Higher interest rates have significantly affected multifamily housing starts, with a 27.8% decline over the past year. Lokar stated that multifamily housing is already in a recession phase of ITR Economics’ four-phase business cycle, citing rising construction costs and oversupply concerns in certain markets. However, he expects a modest rebound in construction activity by 2026 as markets stabilize.
Regional Demographic Shifts – Demographic changes across U.S. regions add another layer to the economic landscape. States like California and Illinois are witnessing population declines, translating to shrinking tax bases and reduced demand in housing markets. Conversely, states experiencing demographic growth, such as Indiana, Tennessee, and Kentucky, offer opportunities for construction and infrastructure expansion. Lokar underscored the importance of positioning businesses in states with higher population growth to capitalize on localized market opportunities, and greater stability leading into the future.
The Global Perspective
Economic Nationalism and Trade – Global trade is reshaping with a trend toward economic nationalism. Lokar cautioned that continued tariff policies, particularly from countries like China, would exacerbate inflation. While these policies could foster domestic manufacturing growth in the U.S., they may hinder international trade efficiencies. The implications for businesses are clear: adjust supply chains and consider sourcing closer to home to offset potential disruptions and rising costs.
Long-Term Growth in Major Economies – Despite challenges, Lokar presented an optimistic growth outlook for major economies like the U.S., China, Europe, India, and Japan, which together account for nearly 70% of global GDP. While the U.S. has struggled in recent quarters, the projected rebound is expected to stimulate demand, albeit at a steady pace rather than a 2021-style surge. This “normal growth” should be manageable and less stressful, offering businesses a chance to strategically plan for sustained, moderate growth.
Strategies for Navigating Economic Uncertainty
Capitalize on Current Market Conditions – Lokar advised that businesses take advantage of the temporary deflation in certain sectors, such as energy and automotive, where prices have softened. “Leverage this short relief in inflation product pricing,” Lokar suggested, as these favorable conditions may not last long. Rising auto inventories and dealer incentives, for example, have created favorable conditions for consumers in the next six to nine months. This brief period offers a window for cost-efficient purchasing decisions before inflationary pressures regain traction.
Prepare for Volatility in the 2030s – As Lokar noted, the economic landscape post-2030 appears less stable, with a significant global depression still in the forecast, triggered in-part by ballooning federal debt, healthcare costs and social security, and shifting global demographics. The potential for a global economic depression in the early 2030s, means that businesses must capitalize on the current growth phase. “We think it is imperative that you exceed and excel in the next three to five years of growth,” Lokar emphasized, encouraging businesses to establish resilience ahead of anticipated economic disruptions.
Next Steps
The economic outlook for 2025 and beyond is shaped by intersecting forces of inflation, demographic shifts, and trade policy adjustments. Businesses that stay agile and proactive in their planning can navigate these challenges. Lokar’s analysis underscores the need for strategic foresight to mitigate risks and seize opportunities in a steadily evolving economic environment.
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