That overheating risk is already visible in today's data. The producer price index surprised to the upside (+3% versus a consensus of +2.7%). And if you look at the core PPI, it is up 3.5% year on year, the fastest pace since March. November retail sales also beat expectations (+0.6% versus +0.5%).
Just ahead of those figures, Apollo's chief economist, Torsten Slok, published a note titled "Stagflation in 2025. Overheating in 2026”, in which he lists 10 factors that will support US growth in 2026. "There are important catalysts that should boost growth and inflation over the next few quarters,” he concludes.
The starting point - which is far from obvious given the narrative of an AI-driven investment boom - is that the US economy slowed last year. After 2.9% growth in 2023 and 2.8% in 2024, 2025 should be closer to 2%, according to various estimates. An exceptional figure for our ageing European countries, but it is still a slowdown. Uncertainty linked to tariffs, in particular, weighed on growth in the first half of 2025.
A reacceleration in growth in 2026 is fairly consensual among economists. The question then is the magnitude of the move and the impact on inflation.
Two factors will be especially supportive of activity. First, AI-related capital spending. That was already the case in 2025, but the trend is expected to continue this year. The five big hyperscalers - Amazon, Alphabet, Meta, Microsoft and Oracle - invested about $400bn in 2025. In 2026, it will be closer to $500bn, according to various estimates.
The other support for growth is the One Big Beautiful Bill, Donald Trump's tax-cut plan adopted by Congress last July. Finally, one can add a calendar factor : the midterm elections, in November. A deadline that rather encourages the Trump administration to deliver another round of fiscal stimulus to avoid losing its majority in Congress.
In recent years, it was more the prospect of a US slowdown that worried investors. The latest episode came last spring, after Donald Trump imposed reciprocal tariffs. This year, it is very much the risk of overheating that matters most.
Already, growth has rebounded after the slowdown in the first half of 2025. In the third quarter, GDP rose 4.3%. For Q4 - the data will be published at the end of the month - the Atlanta Fed's model even forecasts… 5.1% ! (it is a model everyone follows, but the estimate should be treated with caution).
For the financial markets, this scenario is always a double-edged sword. Faster growth is positive for corporate earnings (which remain the main driver of indices). But if the corollary is a renewed acceleration in inflation, it will prevent the Fed from cutting rates again. Fewer rate cuts (or hikes in the worst case) are, by contrast, negative for equity valuations.
For now, looking at inflation over recent months, the trend has been disinflation. The fear of inflation being reignited by tariffs has not materialised.
Ultimately, the ideal scenario for markets would be stronger growth without inflation. A 1990s-style environment, in which growth is driven by investment spending, which in turn generates productivity gains. And, in the end, inflation remains under control.
