What if you could forecast industry trends with the same confidence that a meteorologist predicts the weather? While our economy may seem chaotic at times, it is not without patterns, and those patterns can be decoded and predicted with the right expertise.
That’s why one of the most popular sections within Vertical IQ’s 1,600+ Industry Profiles is the Industry Forecasts chapter. After all, what business owner wouldn’t want to see into the future? That’s why business lenders use our Industry Forecasts to compare business owners’ projections with their industry as a whole. Similarly, business advisors — financial planners, bankers, accountants, consultants, and more — use them to help business owners plan for growth with more clarity and confidence.
Industry forecasting informed by trustworthy datapoints
A common question we get is: How are Vertical IQ’s Industry Forecasts put together? What economic factors drive the forecasts? The short answer is that Inforum, Vertical IQ’s third-party source for these forecasts for more than a decade, uses its highly trusted LIFT (Long-term Interindustry Forecasting Tool) Model to draw connections between the macroeconomy and activities occurring at the individual industry level.
LIFT takes annual economic and demographic data from reliable government statistical sources to simulate and forecast future economic trends. Unlike traditional top-down approaches, LIFT employs a unique “bottom-up” methodology that examines the relationships between individual industries to assess their impact on the broader U.S. economy. This unbiased, detailed, inter-industry analysis supports more informed planning at the individual business level, enhances federal fiscal policy evaluation, and deepens overall insight into our nation’s economic dynamics. Learn more about Inforum’s LIFT Model.
Let’s take a closer look at some of the large-scale macro-economic factors that are driving Inforum’s most recent industry forecasts.
Gross domestic product
Gross domestic product (GDP) is a key indicator of the overall health of the economy. It summarizes expenditures by households, investment activity, government spending, and net exports.
The GDP statistics published by the Bureau of Economic Analysis (BEA) in late May 2025 show a mild contraction in the first quarter of 2025. This represents the first negative growth since 2022. The reported decline was driven mainly by a dramatic surge in imports, together with a small decline in government spending. Other areas of the economy showed better performance, with moderate growth of consumer spending, fixed investment, and exports, while inventory levels rose with the accumulation of imported goods.
Despite the surge of spending on foreign goods, gains in payroll jobs suggest continued overall expansion of American producers despite the reported economic contraction in Q1 2025.
As mentioned above, GDP is a summary indicator of overall economic performance, but it is crucial to investigate the underlying detail. These details are especially important when analyzing specific industries throughout the economy, as some macroeconomic data is more relevant to particular sectors than others.
Armed with this information, decisionmakers possess important context to better understand how various components of the economy are performing and are likely to perform in years ahead.
Personal consumption expenditures
Personal consumption expenditures (PCE) are a major driver of the U.S. economy, accounting for about two-thirds of GDP. PCE includes household spending on goods and services.
The BEA’s latest data show that inflation-adjusted personal consumption decelerated in the first quarter of 2025 but extended its run of consecutive expansions that began in the second half of 2020. Spending volumes for goods saw little change compared to the previous quarter; consumption of services rose slightly. Together, these account for a sluggish overall gain.
PCE is affected by a variety of factors, most notably real disposable income. Income substantially is determined by the labor market, with Social Security and other government programs contributing and taxes subtracting from disposable income. Changes in purchasing power also depend on consumption price inflation. Consumers who are confident in their current employment situation and future prospects are more likely to spend their income on goods and services.
Job growth has slowed somewhat from the rapid gains in recent years, and other signs of deterioration have emerged. However, the labor market has largely been resilient; payroll job growth remains in positive territory and the unemployment rate stood at 4.1% in June 2025. Although unemployment has crept higher over the last two years, it remains low by historical standards.
Another key measure is labor force participation: the share of working-age population who are employed or seeking employment. The rate is currently stalled near 62.5%. This represents a significant improvement over the period during and just after the COVID-19 pandemic, but it remains somewhat below rates just before the pandemic, in part due to retirements of Baby Boomers.
After adjusting for taxes and inflation, real disposable income decelerated but rose faster than spending in Q1 2025; savings rates improved but remain low. Consumer price inflation remains a key concern as it affects a household’s ability to pay for goods and services, and it influences their view of the broader economic and political environment.
The Federal Reserve’s preferred measure of inflation is the BEA index of PCE prices excluding volatile energy and food categories; it indicates that price growth has moderated significantly in recent years, albeit unevenly. These prices accelerated in Q1, rising from an annual rate of 2.6% in Q4 2024 to a rate of 3.5% in Q1 2025.
Imposition of new tariffs threatens the downward trajectory of these inflation rates, potentially delaying the approach of inflation to the 2.0% target rate held by the Federal Reserve and slowing the reduction of policy interest rates.
Private fixed investment
Private fixed investment is another major component of the U.S. economy. Residential investment includes new home construction and residential renovations. Following an initial surge during the pandemic years that provided an important boost to economic activity and jobs, weak residential investment has weighed on GDP growth more recently. High prices of construction materials and elevated borrowing costs have made home affordability more difficult for many in the economy.
Nonresidential investment drives future economic growth through increased productive capacity and potentially improved productivity. Business investment spending is sensitive to interest rates and businesses’ confidence in the economy. Nonresidential investment includes spending on machinery and other equipment; structures (such as factories, offices, and stores); and intellectual property (mainly software and R&D).
BEA reports reduced nonresidential construction activity in Q1 2025, suggesting that companies may be waiting for greater stability and reduced borrowing costs. At the same time, spending on equipment surged as firms acquired needed machinery and equipment before tariffs take effect.
The frenetic pace at which federal policy, especially tariff and immigration policies, have been imposed in recent months has led some firms to delay important decisions. In a globalized economy, many firms rely on foreign producers of goods and services. With the prospect of higher tariffs, many acted quickly to import goods before the increase, driving import volumes up dramatically in Q1 2025.
At the same time, retaliatory tariffs imposed by other countries threaten demand for U.S. exports. Given the recently volatile tariff policies, firms may opt to wait to make significant investments until greater clarity of the business environment is available.
Given the prospect of upward price pressures caused by tariffs, the Federal Reserve has postponed further cuts to policy interest rates; this influential interest rate affects borrowing costs for business loans, mortgages, vehicles, and credit cards. Rate cuts could bolster a slowing economy, and so long as the Fed’s monetary policy options are limited by tariff uncertainty, its ability to foster growth likewise could be limited. Households and businesses may wait for additional cuts before making investments that require significant borrowing.
Industry production volumes
Foreign firms supply a significant portion of the goods and services purchased by American consumers, businesses, and governments. These foreign producers dominate certain markets, but producers in the U.S. satisfy a far greater portion of demand in this country and a smaller portion of demand elsewhere.
Despite the surge of supply from foreign producers, industrial production volumes in Q1 2025 indicated robust growth for American goods production. This growth was led by utilities and manufacturers, with production by the mining sector also contributing to growth.
While some producers will realize benefits of protection from foreign competition offered by higher tariffs, American producers also will realize elevated production costs due to their reliance on imports of goods needed for production and for investment needs. As retaliatory tariffs are imposed, exporters of aircraft and other goods could see deterioration in foreign markets.
International trade of services is rising, but most demand for consumer and business services is satisfied by American firms. About 70 cents of each dollar spent by consumers goes to services. Although inflation-adjusted spending on consumer services decelerated in Q1 2025, its moderate increase was supported by significant spending on healthcare, housing and utilities, transportation, and certain other services. Of the broad spending categories, only recreational services and restaurant and hotel volumes declined.
At this time, production data for services are limited for Q1 2025, but consumer spending data suggest that many American service industries likely saw gains early in the year. More and better data will become available in months ahead to allow a better understanding of these developments.
Unpacking Inforum’s LIFT forecasting model
Economic models built and operated by Inforum, such as the LIFT Model, link macroeconomic conditions with industry production. For example:
- Personal consumption expenditures drive demand and thus revenue for Retail Trade (NAICS 44-45) industries, as well as industries engaged in the production of consumer goods and services.
- Private investment spurs growth for Construction (NAICS 23) and Manufacturing (31-33) industries. Investment also affects select service industries such as those providing R&D and software development.
- Government consumption and investment expenditures support Public Administration (NAICS 92). Government also provides services in Education (NAICS 61), Health Care (NAICS 62), Utilities (NAICS 22), and Transportation (NAICS 48-49) industries.
- Exports and Imports generally support Wholesale Trade (NAICS 42) and Transportation and Warehousing (NAICS 48-49) industries through the shipment and distribution of goods. Imports of consumer goods also support the retail sector.
These relationships flow in both directions, with industry activity influencing macroeconomic dynamics and vice versa. Additionally, a surge in activity for a particular industry will support growth in supporting sectors through supply chain impacts. Inforum’s models are expertly constructed to capture this interconnectedness.
Count on the industry forecasting experts
Looking behind the curtain at the macroeconomic forces that drive Vertical IQ’s Industry Forecasts offers more than just nitty-gritty economic details. It provides our users with confidence and essential context for smarter planning, advising, and data-driven decision-making.
By leveraging Inforum’s trusted LIFT Model and its unique bottom-up approach to data analysis, Vertical IQ delivers trustworthy forecasts that reflect the real-world complexities of today’s economy. Whether you’re guiding business owners, evaluating industry risk, or planning for the future, these insights offer businesses a powerful advantage in our nation’s ever-changing business landscape.
About Inforum
Inforum is an economic research organization that specializes in building economic models and employing input-output techniques for nearly 60 years. Since its founding in 1967, Inforum has been dedicated to improving business planning, government policy analysis, and the general understanding of the economic environment. Inforum develops and applies dynamic inter-industry macroeconomic models that portray the economy in a unique “bottom-up” fashion, helping relate the macroeconomy to detailed industry activity. Learn more about Inforum.
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