NextFin news, WASHINGTON, D.C. — On Sunday, September 14, 2025, economic data and expert analysis confirmed that the United States economy has defied widespread forecasts of recession and stagflation for 2025, outperforming major developed nations including the UK, Germany, France, Italy, Japan, and the euro area.
Contrary to the mainstream Keynesian narrative prevalent earlier this year, the US economy demonstrated broad-based strength with real GDP growth rebounding to an annualized rate of 3–3.3% in the second quarter and the Atlanta Fed’s GDPNow model projecting a steady 3% growth pace for the third quarter. This growth was supported by consumer spending, imports, and business investment, while government spending remained controlled, according to a detailed report published on Sunday by economist Daniel Lacalle.
Inflation concerns linked to tariffs and global uncertainties have also been alleviated. August’s Consumer Price Index (CPI) and Producer Price Index (PPI) data showed inflation rates close to or below expectations, with stable prices for durable and nondurable goods. Energy and key imports prices have either decreased or stabilized, dispelling fears that tariffs have significantly increased the cost of living for Americans.
The labor market has maintained momentum from January through August 2025 despite revisions to previous job creation figures. The Bureau of Labor Statistics revealed that the US was in a private sector recession in 2024, with job creation figures requiring a downward revision of two million jobs from 2023 to 2024. However, private payrolls have since reported consistent net gains, especially in service and construction sectors. Real wage growth accelerated, with real average hourly earnings rising by 1.2% and real weekly earnings by 1.4% between July 2024 and July 2025, boosting middle-class disposable income and retail demand.
Retail sales have remained resilient amid market volatility and trade uncertainties. Bloomberg forecasts a 0.2% increase in headline retail sales and a 0.3% rise in the core control group for August 2025, reflecting cautious but stable consumer sentiment and growing household consumption driven by strong labor markets and wage growth.
Financial markets have responded positively to the growing consensus that inflation risks are under control, with expectations rising for the Federal Reserve to cut interest rates in the coming months. This shift could further stimulate borrowing, investment, and economic momentum for the remainder of 2025.
The report criticized the Federal Reserve’s earlier models for relying on inflated labor market figures and ignoring its own Beige Book warnings of a slowdown in job creation during March and April 2025. The Fed’s models were deemed biased and inaccurate, as the US economy is currently experiencing a genuine private sector expansion supported by strong job and wage growth, favorable taxation, and deregulation, while tariffs have had no significant inflationary impact.
These findings highlight a marked divergence from the pessimistic predictions of recession and stagflation that dominated economic forecasts earlier this year, underscoring the need for data-driven policy decisions moving forward.
Source: Blog de Daniel Lacalle, September 14, 2025, https://www.dlacalle.com/en/the-fed-models-were-wrong-about-the-us-economy/
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