Economy, weather, and CO₂

U.S. macroeconomics
This month’s forecast assumes real GDP will grow at an annual rate of 1.4% in 2025 and 1.9% in 2026. The 2025 forecast remains unchanged from last month, and the 2026 forecast has been revised upward by 0.2 percentage points.

The macroeconomic assumptions in the STEO are based on S&P Global’s macroeconomic model. We incorporate STEO energy price forecasts into the model to obtain the final macroeconomic assumptions.

The current forecast reflects the U.S. Bureau of Economic Analysis’s (BEA) second estimate for 1Q25 GDP growth, which showed a contraction of 0.2%. This estimate represents an upward revision of 0.1 percentage points compared with the 0.3% contraction from the advance estimate. BEA’s third estimate, which came out after S&P updated its macroeconomic model for the month, showed a contraction of 0.5% in 1Q25.

A downward revision to the inflation forecast, due to easing trade tensions between China and the United States, contributed to the more optimistic macroeconomic outlook compared with last month’s forecast. The forecast now assumes that inflation, measured as the year-over-year percentage change in the Consumer Price Index, will peak at 3.1% from August through October 2025, which is lower than the 3.7% peak in June projected in last month’s forecast.

S&P Global expects reduced tariffs on imports from China compared with last month, and tariffs on imports from other countries to remain at 10% after the 90-day pause expires in July. Future trade policy and its potential macroeconomic effects continue to be a source of uncertainty in our outlook.

Emissions
We forecast U.S. energy-related carbon dioxide (CO₂) emissions to increase by 1.3% in 2025, followed by a decrease of 1.3% in 2026. Changes in emissions from coal drive the overall change in emission in both forecast years.

At the monthly level, we expect increased CO₂ emissions—of about 8% between June and July 2025—as we progress into the summer season. We expect August emissions to remain near July levels before declining in September and into the fall season. These trends are consistent with historical emissions data, which exhibit seasonal peaks in both the summer and winter months. Peaks in the summer months are mostly from the electric power sector and are associated with increased electricity use for space cooling. We measure demand for space cooling in cooling degree days (CDD). Peaks in winter months occur mostly in the residential and commercial sectors and are associated with increases in demand for space heating. We measure demand for space heating in heating degree days (HDD).

Although both summer and winter emissions are higher than spring and fall emissions, the winter emissions peak is typically higher than the summer peak. This difference occurs for a variety of reasons, such as total energy consumption for space heating compared with space cooling or differences in the emissions intensity of heating versus cooling, which may vary by state or region.

Weather
Despite heat waves across the country at the end of June, the United States averaged more than 460 CDDs during 2Q25, 7% fewer than in 2Q24. Based on our current forecasts and data from the National Oceanic and Atmospheric Administration, we expect around 360 CDDs in July, 7% fewer than in July 2024 and 3% fewer than the 10-year monthly average. Fewer CDDs mean we are likely to have a slightly cooler summer (June–September) in 2025 than summer 2024. Overall, our forecast assumes the United States will average about 1,560 CDDs in 2025, 5% fewer than in 2024, which had higher-than-average temperatures.