ITR Economics uses the four-phase business cycle to guide your company through the ups and downs of the market; however, sometimes it is useful to take a step back and look at the market’s long-term trajectory.

Over the long haul, macroeconomic growth is the norm. The ups and downs of business cycles eventually smooth out on a macro-level, with each successive accelerating growth phase bringing US Real Gross Domestic Product to new record highs. Although we anticipate that GDP will slow down in 2027 and take a hard hit in the 2030s, cumulative investments in the economy from recent years will allow higher levels of economic activity through 2026 and into 2027.

US Capital Assets Likely to Support Growth Ahead

Hard assets like machinery, equipment, and technology are a cornerstone of economic growth. Capital equipment that increases production capacity, efficiency, or product quality generates the potential for higher margins. Investments made today will improve the US industrial base of tomorrow to the extent their use is supported by the regulatory, financial, and labor environment. The following considerations inform our view that US capital assets will contribute to growth in the coming years:

• At $885.5 billion, annual US Non-Defense Capital Goods New Orders, which includes spending on all types of machinery, equipment, and technology, is trending near record highs.
• The overarching long-term trend for New Orders is rise, despite a slight downward shift to a slower long-term pace in the last decade.
• Businesses will continue to invest in themselves as the positive business environment extends through the rest of this decade.
• Businesses are likely to acclimate to higher interest rates up to a point, driving further investment and deployment of capital assets.

Skyrocketing Infrastructure Spending Is Another Macro-Driver

A key contributor to US capital investment has been the nearly $1 trillion Bipartisan Infrastructure Bill, which seeks to modernize and rebuild US infrastructure. The BIL presents opportunities for local governments and other non-traditional entities to access new funding and create millions of new jobs. As of late 2024, the US Department of Transportation reported that the infrastructure law had already created around 2.4 million jobs.

Of the $1 trillion, $570 billion has been awarded by the Biden Administration, although some of the allocated money has not been spent yet. US Total Infrastructure Construction has risen by 31%, over $100 billion since the bill was passed in late 2021. Estimates suggest there is around $294 billion left for the Trump Administration to award. It remains to be seen if indeed the new administration will award this money.

What to Look Out For Ahead

Both private US capital expenditures and the windfall of US government infrastructure spending position the US economy for growth in the coming years. However, in the case of US government spending, there is a catch. According to the Congressional Budget Office, infrastructure spending will contribute $256 billion to the US federal deficit over 10 years, and an unsustainable debt burden is a key reason we expect economic depression in the 2030s.

Additionally, the complexity of US government regulations and the potential for adverse effects stemming from tariffs may impact how effectively capital assets convert into economic growth. It will be important to remain tuned in to any unfolding policy changes.

Register now for our 2025 Crowe // ITR Economics Summit during which we will offer a deep dive into current business and economic issues, including an unbiased analysis of the economic impacts of the new administration's policies. The summit will also provide guidance for managing pricing challenges during inflationary and deflationary periods to protect margins and avoid the potential pitfall of “profitless prosperity”.