Market Matters: State of Confusion

The U.S. economy is in a state of confusion with some segments strong and some weak. The net effect of these offsetting forces is slow growth in the short-term (2025 – 2027 of 1.9 percent), and growth accelerating slightly in the longer term (2009 – 2030 of 2.5 percent). Some of the segments considered stronger are as follows:

  • Consumer Spending continues to grow despite headwinds posed by inflation, weak disposable income, and weak household growth.
  • Artificial Intelligence has and will continue to enhance productivity, spur construction in energy production facilities, and accelerate the repurposing of buildings, especially
  • Interest rates will continue to fall as the Fed reduces the discount rate, improving housing affordability, reducing commodity pricing, and mitigating the impact of
  • Inflation will decline as energy production ramps up and core-inflation continues to fall towards the Fed’s target rate of 2.0 percent.
  • Real disposable personal income growth continues to increase and is exceeding the core inflation rate of growth.
  • Housing Starts are increasing as interest rates fall and builders offer interest rate buy-downs and purchase
  • Existing home sales, currently averaging a weak 4 million units annually, are forecasted to return to 5 million units per annum in 2027 as interest rates fall and affordability becomes tenable.

Major uncertainties and risks facing the U.S. economy and this forecast is the impact of the wide-ranging tariffs and the federal government budget cuts and federal labor lay-off initiatives being instituted by the Trump Administration. The tariffs, by far, present the greatest unknowns and the highest risks, including:

  • Tariffs could create chaos for supply chains, dislocate manufacturing and sales, and kick-up Also, tariffs could worsen fiscal deficits, adding pressure to long-term interest rates. The current trade-weighted tariff rate is 26 percent among the largest nations importing flooring into the U.S. This rate is likely too large to be wholly absorbed by importers.
  • Uncertainty about tariffs and general economic conditions is causing both consumers and businesses to hold back on spending and investment until more clarity is
  • Inflation remains a threat if current policies to reduce it are
  • Unemployment remains stable and positive and will remain that way through
  • The gross federal debt is currently very high at $37.3 trillion, up 37 percent from 2020, and 121 percent of GDP currently.
  • An escalation of war in Ukraine, the war on drugs, or new global conflicts in the middle east or Europe could threaten the global economic stability.
  • A trade war instigated by a reaction to the newly instituted S. tariffs would also void the assumptions underlying this forecast.

U.S. Real GDP growth will slow in 2025 and 2026 as growth is frustrated by uncertainty regarding the long and short-term impact of the Trump Administration policies (tariffs, taxes, immigration, etc.). The scope of the stated policies of the new Trump Administration is so sweeping, if only partly implemented, they could have a major impact, either positive or negative on the U.S. economy.

Key assumptions and issues effecting the U.S. economy:

  • Housing starts should average 37 million units annually (a mediocre rate) in 2025, still single-family starts are growing, and this will continue to aid some economic growth to the economy.
  • Residential home improvements will be stymied in 2025 as the uncertainty impact of the new federal policies slowly becomes clear. Spending is expected to recover slightly in 2026 before increasing at a moderate rate from 2027 onwards and throughout the remaining forecast period.
  • Consumer spending, although growing modestly, is slowing as many consumers’ finances are being stretched by inflation, high interest rates, and slowing employment growth. Still, the labor market remains resilient, and assets values are stable.
  • Real personal disposable income will grow at an inflation adjusted annual rate of 2 percent or greater through 2030, largely driven by moderate growth in skilled and technical worker employment increases and general wage
  • Non-residential building construction will grow throughout the forecast period, especially for education, transportation facilities, health care, offices (mainly data centers, and professional offices) and institutional building.

Factors threatening the U.S. economy include:

  • Inflation will continue to be an issue among key commodities for consumers. Much of the inflation reduction agenda depends on Congress working together to put aside personal interest, reduce spending, and pass the required legislation.
  • Federal debt will exceed $37 trillion for the S. by the end of 2025.
  • Slowing employment growth, the result of government lay-offs and automation among domestic industries, if not offset by jobs created by firms on-shoring, new investments in domestic production, and consumer spending, will slow economic growth.
  • The unknown long-term effects of the imposition of tariffs on foreign imports is a major risk.
  • Other potential threats to the U.S. economy include a widening war in the Ukraine or Middle East, new conflicts in Taiwan with China, the Persian Gulf, or other areas; a major domestic civil disturbance; another global pandemic; a major trade war threatening prices and logistical trains; a natural disaster requiring emergency aid; or other catastrophe.

Santo Torcivia is president of Market Insights LLC in Reading, Pennsylvania. He can be reached at 610.927.2299 or storcivia@marketinsightsllc.com.

This is a summary of the December 2025 Quarterly Market Monitor Report published by Market Insights LLC. NWFA members have exclusive access to the full report, which provides forecasts and analysis of economic, market, and industry conditions and trends affecting the North American flooring market. The report includes a historical and forecasted volume of dollar sales of total wood flooring (at mill sell price) per metro area and state. Separate reports are available for the United States and for Canada. The availability of the reports on a quarterly basis will provide NWFA members with current data that can help them develop business plans, prioritize inventory, and react to market conditions in a timely manner. NWFA members may download the full report by visiting nwfa.org.