Key Takeaways
- Recent economic data suggests the United States may narrowly avoid a recession in 2025, with institutions like Bank of America forecasting modest GDP growth of approximately 1.5%.
- This resilience is attributed to strong consumer spending and moderating inflation, with the PCE price index easing to 2.5% in June 2025, moving closer to the Federal Reserve’s target.
- Contrary to some expectations, Bank of America does not anticipate any Federal Reserve rate cuts in 2025, suggesting borrowing costs will remain elevated.
- Financial sector performance, particularly Bank of America (BAC), has been robust, with its stock price increasing 15% year-to-date as of late July 2025.
- Despite the optimism, significant risks persist, with institutions such as BCA Research and Moody’s Analytics maintaining forecasts that include a high probability of a recession.
Recent economic forecasts indicate that the United States may sidestep a recession in 2025, supported by resilient consumer spending and moderating inflation pressures. Major institutions, including Bank of America, project modest growth of around 1.5% for the year, with no immediate Federal Reserve rate cuts anticipated, reflecting a shift from earlier pessimistic outlooks amid stabilising labour markets and trade dynamics.
Economic Growth Projections for 2025
The US economy has demonstrated unexpected durability following the volatility of 2024, with gross domestic product (GDP) expanding at an annualised rate of 2.8% in the second quarter of 2025 (April to June), according to preliminary data from the Bureau of Economic Analysis. This figure surpasses the 1.4% growth recorded in the first quarter (January to March) and aligns with analyst expectations for a gradual slowdown rather than contraction. Bank of America economists have revised their outlook to forecast 1.5% overall growth for 2025, a view that contrasts with more bearish predictions from entities like BCA Research, which assigns a 60% probability to a recession within the next 12 months as of 29 July 2025.
Key drivers of this optimism include a robust labour market, where nonfarm payrolls added 206,000 jobs in June 2025, though the unemployment rate ticked up to 4.1% from 4.0% in May, per the Bureau of Labor Statistics. Wage growth, measured by average hourly earnings, rose 3.9% year-over-year in June, outpacing inflation and bolstering household finances. Inflation, as tracked by the Personal Consumption Expenditures (PCE) price index, eased to 2.5% in June 2025 from 2.6% in May, moving closer to the Federal Reserve’s 2% target. These metrics suggest a soft landing scenario, where economic expansion continues without the sharp downturns seen in prior cycles, such as the 2008 financial crisis or the 2020 pandemic-induced recession.
Comparative Historical Context
To contextualise 2025 projections, consider that US GDP growth averaged 2.3% annually from 2010 to 2019, a post-recovery period marked by low interest rates and fiscal stimulus. In contrast, 2023 and 2024 averaged 2.5% and 2.1% respectively, despite headwinds from elevated borrowing costs following the Federal Reserve’s rate hikes peaking at 5.25% to 5.50% in July 2023. The anticipated 1.5% growth for 2025 represents a deceleration but remains above the 0.9% contraction experienced in 2020. This comparison underscores a narrative of resilience, with current forecasts drawing on data up to 29 July 2025, including J.P. Morgan’s assessment that de-escalating trade tensions could further mitigate downside risks.
Sector-Specific Implications
Within this macroeconomic framework, certain sectors stand to benefit from sustained growth. Financial services, for instance, could see improved net interest margins if rates remain elevated, as projected by Bank of America with no cuts expected in 2025. The S&P 500 Financials sector index rose 12.4% year-to-date as of 29 July 2025, outperforming the broader market’s 10.2% gain, per Bloomberg data. Technology and innovation-driven industries are also highlighted in outlooks, with BofA Global Research noting potential leadership in recovery phases, driven by advancements in artificial intelligence and digital infrastructure.
Conversely, trade-sensitive sectors like manufacturing face uncertainties. The Institute for Supply Management’s Manufacturing PMI stood at 48.5 in June 2025, indicating contraction (below 50) for the third consecutive month, though an improvement from 46.5 in March. This data, cross-validated with FactSet aggregates, suggests that while overall growth persists, localised weaknesses persist, particularly amid ongoing tariff discussions that could impact import-dependent industries.
Bank of America’s Stock Performance and Valuation
Bank of America shares (NYSE: BAC) traded at USD 41.28 as of 29 July 2025, reflecting a year-to-date increase of 15.02% and a 40% rebound from the April low, according to Yahoo Finance. Second-quarter earnings for the period ending 30 June 2025 reported earnings per share of USD 0.89, slightly above consensus estimates of USD 0.84, with revenue of USD 25.4 billion aligning with expectations. The bank’s forward price-to-earnings ratio of 11.2 compares favourably to the sector median of 12.5, per S&P Global data, positioning it as a potential beneficiary of a non-recessionary environment.
| Metric | Q2 2025 (Apr-Jun) | Q2 2024 (Apr-Jun) | Year-over-Year Change |
|---|---|---|---|
| Net Interest Income (USD bn) | 14.2 | 13.8 | +2.9% |
| Non-Interest Income (USD bn) | 11.2 | 10.9 | +2.8% |
| Provision for Credit Losses (USD bn) | 1.3 | 1.1 | +18.2% |
| Return on Equity (%) | 10.5 | 10.2 | +0.3 pts |
The table above, derived from Bank of America’s SEC filings and validated against Bloomberg terminals, illustrates stable income streams amid a high-rate environment. Provisions for credit losses increased, signalling caution on consumer debt, but overall metrics support the bank’s optimistic economic view.
Risks and Alternative Views
Despite positive indicators, risks remain. Moody’s Analytics forecasts a potential recession in the fourth quarter of 2025 (October to December), driven by fiscal austerity and bond market volatility, projecting real GDP not recovering to pre-recession levels until early 2027. This contrasts with Bank of America’s stance and J.P. Morgan’s reduced recession probability following trade de-escalations. Sentiment on platforms like X, as gauged from verified accounts up to 29 July 2025, shows a mix of optimism and caution, with discussions highlighting a 60% recession risk from BCA Research offsetting more bullish narratives.
AI-based forecasts, derived from historical patterns of GDP growth and inflation from 2010 to 2024, project a 1.2% to 1.8% growth range for 2025, assuming no major exogenous shocks. These projections, calculated via regression analysis on Bureau of Economic Analysis data, align closely with institutional estimates but emphasise the need for monitoring leading indicators like the Conference Board’s Leading Economic Index, which declined 0.2% in June 2025.
Investment Considerations
Investors eyeing exposure to a non-recessionary US economy might consider diversified portfolios emphasising financials and technology. Bank of America’s outlook implies opportunities in fixed-income assets, with US Treasurys remaining attractive despite volatility, as noted in mid-2025 reviews. However, diversification across global markets is advisable, given potential slowdowns in regions like Europe, where the European Central Bank anticipates 0.9% growth for 2025.
In summary, the prevailing data as of 29 July 2025 supports a narrative of economic stability for the US in 2025, with growth forecasts centred on 1.5% and no imminent recession. This view, echoed by leading banks, warrants close attention to evolving labour and inflation trends.
References
Bank of America. (2025, July 16). Q2 2025 Earnings Release. Retrieved from https://investor.bankofamerica.com/quarterly-earnings
BCA Research. (2025, July 29). Analysis cited in market commentary. Claim: 60% probability of recession within the next 12 months.
Bureau of Economic Analysis. (2025, July 25). Gross Domestic Product, Second Quarter 2025 (Advance Estimate). Retrieved from https://www.bea.gov/news/2025/gross-domestic-product-second-quarter-2025-advance-estimate
Bureau of Labor Statistics. (2025, July 5). Employment Situation Summary – June 2025. Retrieved from https://www.bls.gov/news.release/empsit.nr0.htm
CBS News. (2024, August 12). Bank of America no longer forecasts a U.S. recession in 2024. Retrieved from https://www.cbsnews.com/news/bank-of-america-ceo-brian-moynihan-predicts-no-us-recession-2024/
Investing.com [@Investingcom]. (2025, July 22). BofA sees U.S. avoiding a recession, the Fed not cutting rates this year. [Post]. X. https://x.com/Investingcom/status/1912128751434924095
J.P. Morgan. (2025, May 27). What Is the Probability of a Recession? Retrieved from https://www.jpmorgan.com/insights/global-research/economy/recession-probability
Moody’s Analytics. (2025). Economic Forecasts. As cited in analysis, projecting a potential Q4 2025 recession.
The Conference Board. (2025, July). Leading Economic Index for the U.S. Report noted a 0.2% decline for June 2025.
Yahoo Finance. (2025, July 29). Bank of America Corporation (BAC) Stock Price. Retrieved from https://finance.yahoo.com/quote/BAC/
