Economy, weather, and CO₂

U.S. macroeconomics
The macroeconomic forecasts in the STEO are based on S&P Global’s macroeconomic model. The most recent model was released in mid-March and does not completely reflect the tariffs announced on April 2 or after, however, the assumptions included are partly in line with the announcement. S&P Global’s forecast assumes an increasing universal tariff that will reach 10% by the end of 2025 and 30% on U.S. imports from China, with that rate rising to 45% by June. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

In recent weeks, several macroeconomic indicators were revised lower than our previous forecast assumed, resulting in a downward revision to the macroeconomic assumptions that underlie our April STEO. Our forecast this month assumes that real GDP will grow by 2.0% in 2025, a downward revision of 0.4% from last month, and by 2.0% in 2026, a downward revision of 0.2% from last month. The revision is the result of slower growth in the first half of 2025.

A decline of 0.5% in consumer spending in January, coupled with slow growth for the rest of the year, contributed to the downward revision to the GDP forecast. The decrease in January is the largest since February 2021. It is unclear to what extent the slowdown will continue, as unseasonably cold weather and the wildfires in California in January may have been partially responsible, and their effects will likely dissipate in the coming months.

The trade deficit also widened in January, reaching a record high, due to a sharp rise in imports. Imports are a subtraction in the calculation of GDP, so, all else equal, an increase in imports causes a decline in net exports and GDP.

The monetary policy assumptions that underlie the forecast were also revised this month. S&P Global no longer assumes that the Federal Open Market Committee will reduce the target for the federal funds rate in May and assumes the only cut in 2025 will occur at the December meeting.

Emissions
We forecast U.S. energy-related carbon dioxide (CO₂) emissions will increase by 1% in 2025, followed by a 1% decrease back to 2024 levels in 2026.

Coal, petroleum products, and natural gas all contribute to changes in 2025 and 2026 emissions. Coal emissions make up most of the total emissions increase in 2025 and most of the decrease in 2026. These changes are associated with coal-fired electricity generation, which we forecast to increase by 6% in 2025 and decrease by 9% in 2026.

Petroleum emissions decrease slightly in 2025 and increase by less than 1% in and 2026 in our forecast. The modest increase in 2026 is mostly due to increased consumption of distillate fuel oil and jet fuel. These petroleum products are predominantly linked to the transportation sector, where they are frequently used as fuels for on-road and air travel, respectively.

Total natural gas emissions in our forecast increase by less than 1% in 2025 before falling slightly in 2026. Total emissions from natural gas change only a little, which mostly reflects counteracting changes in natural gas use across sectors. The residential, commercial, and electric power sectors are most influential on overall natural gas-related emissions. Electric power natural gas emissions are associated with natural gas-fired electricity generation, while emissions from buildings are mostly associated with demand for space heating. Residential and commercial buildings drive natural gas emission increases in 2025 due to higher anticipated space heating demand relative to 2024, which are mitigated by decreases in natural gas-fired electricity resulting from higher natural gas prices.

Weather
Mild weather in March partially offset the colder-than-normal weather throughout the United States in January and February. The United States ended the 2024–2025 winter heating season (November–March) with 7% more heating degree days (HDDs) than last winter and slightly fewer HDDs than the 10-year winter average. Based on our current forecasts and data from the National Oceanic and Atmospheric Administration, we expect the United States will average about 1,580 cooling degree days (CDDs) in 2025, 4% fewer CDDs than in 2024, as cooler weather in the second quarter of 2025 (2Q25) (9% fewer CDDs than 2Q24) more than offsets slightly warmer weather in 3Q25 (3% more CDDs than 3Q25).