UBS, a leading global investment bank, has assessed a 93% probability of a recession in the U.S. based on "hard data" from May through July 2025. This elevated risk level is historically significant and draws on objective economic indicators such as personal income, consumption, industrial production, and employment, while excluding sentiment-based data.
Classic signals of impending recession, including a 23% inverted yield curve and credit market stress indicators doubling since January 2025, support this analysis. However, UBS notes that none of the data shows sharp, rapid deterioration; instead, the economy is in a prolonged phase of slow contraction, described as “soggy, soft, and weak but not collapsing.”
The bank does not currently forecast a formal recession but anticipates slow growth with potential improvement in 2026.
The US annual inflation rate remained steady at 2.7% in July, unchanged from June and slightly below forecasts of 2.8%.
Core inflation, excluding food and energy, accelerated to 3.1%, a five-month high and above expectations.
Source: Trading Economics
Total U.S. household debt increased by $185 billion (1%) in the second quarter of 2025, reaching a record $18.39 trillion, according to the Federal Reserve Bank of New York.
Mortgage debt led the increase, growing by $131 billion to $12.94 trillion.
Nominal wage growth in the U.S. averaged about 4.2% YoY as of July 2025, outpacing inflation which held at 2.7%.
Despite positive trends, concerns persist about sluggish wage growth in certain industries and uneven labor market dynamics.
The U.S. economy is experiencing downward growth pressures as wage growth slows and inflation-adjusted earnings decline.
Experts warn that if these trends persist, ongoing inflation and a softening labor market could deepen the economic slowdown.