PNC Economics Research – National Economic Outlook, Feb 2026

The report analyzes the U.

S. economic outlook as of early 2026. Growth in 2025 remained firm but was increasingly dependent on a narrow set of drivers, specifically AI-related capital expenditures and consumption by higher-income households. The labor market experienced a material slowdown, posing vulnerabilities entering 2026. Recent data indicate improvement in the labor market and sectors sensitive to economic cycles, suggesting a potential broadening of economic expansion in early 2026. AI remains a central theme, with continued strong investment in hyperscale capital expenditures supporting growth, though labor market disruptions in narrow sectors are becoming evident. The U.S. Supreme Court struck down tariffs imposed under the IEEPA, but alternative tariff authorities will likely maintain tariff rates near current levels, limiting positive impacts on growth and inflation. The Federal Reserve is expected to hold interest rates steady through the first half of 2026, with possible cuts in July and September, as labor market stabilization reduces urgency for rate cuts.