Economy, weather, and CO2
U.S. macroeconomics
This month’s forecast assumes that real GDP will grow at an annualized rate of 1.4% in 2025 and 1.7% in 2026—a downward revision of 0.1 percentage points and an upward revision of 0.1 percentage points, respectively, from last month.
The current forecast incorporates the U.S. Bureau of Economic Analysis’s (BEA) advance estimate for first quarter 2025 (1Q25) GDP, which shows a contraction of 0.3%, 0.6 percentage points below last month’s projection of 0.3% growth. The forecast was compiled after the BEA’s second estimate that showed a 0.2% contraction in 1Q25. Despite this change, only small revisions were made to GDP growth as the forecast included changes to S&P’s assumptions regarding trade policy, improved financial conditions, and a rebound in equity markets.
Our forecast now assumes a reduction in tariffs on imports from China compared with last month and moving forward, while tariffs on imports from other countries are expected to remain at 10% following the expiration of the 90-day pause in July. S&P Global’s forecast was finalized before the ruling by the Court of International Trade on May 28 that temporarily halted the implementation of all reciprocal tariffs. Future trade policy and its macroeconomic implications continue to be a source of uncertainty in our outlook.
BEA’s advance estimate also shows consumer spending grew at an annualized rate of 1.7% in 1Q25. Although this percentage marks a slowdown from annual growth of 2.8% in 2024, it is notably higher than last month’s forecast, which assumed near-zero growth for the quarter. Consumer spending is now assumed to increase at an average 2.3% in 2025 and 1.5% in 2026. Consumer spending grew in 1Q25, despite deteriorating consumer sentiment and mixed retail sales data during January and February. Whether consumer spending continues to grow at its current pace is another source of uncertainty in our outlook.
We base the macroeconomic assumptions in the STEO on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.
Emissions
We forecast U.S. energy-related carbon dioxide (CO2) emissions to increase by around 1.2% in 2025, followed by a decrease of around 1.3% in 2026. Natural gas and petroleum products emissions increase by 1% in 2025 while coal emissions increase by 3%. Decreases in 2026 are associated with less consumption of all fossil fuels.
In addition to identifying changes in CO2 emissions by component fuels, a common approach to represent changes in CO2 emissions is through key economic and energy indicators :
- Carbon intensity (CO2 output per unit of energy used)
- Energy intensity (energy used relative to GDP)
- GDP per capita
- Population
In both 2025 and 2026, population growth and rising GDP per capita result in increasing emissions. Carbon intensity falls modestly in both years as fuels with higher carbon content, such as coal, are used less relative to lower carbon fuels, such as renewable sources. Energy intensity is also forecast to fall as economic growth outpaces energy consumption.
Growth in population and GDP per capita exceeds declines in carbon intensity and energy intensity in 2025, resulting in a net increase in overall CO2 emissions. In 2026, energy intensity declines more sharply, as GDP continues to rise and overall energy consumption remains flat, leading to a net decrease in emissions.
Weather
Our forecast assumes a slightly cooler summer (June–September) in 2025 with 1% fewer U.S. cooling degree days (CDDs) than the summer of 2024. Based on our current forecasts and data from the National Oceanic and Atmospheric Administration, we expect about 250 CDDs in June, 16% fewer CDDs than in June 2024 and 4% fewer CDDs than the 10-year monthly average. Slightly warmer temperatures in the third quarter of 2025 are expected to partially offset the cooler start to the summer. As a result, we expect the United States will average about 1,550 CDDs in 2025, 5% fewer CDDs than in 2024 which experienced higher-than-average temperatures.
