GDP forecasts, projected tax refunds, falling rents resulting in disposable income are among the factors that point to a steady economic perspective for 2026. There could still be headwinds, such as assessing the impact of storms early in the year that led to thousands of flight cancellations, and uncertainly on the current slow and steady hiring environment. But ALHI’s CEO Michael Domingez remains bullish in his economic forecast in this issue of Connecting the Dots.
Michael Dominguez: Well, on this episode of Connecting the Dots, I wanted to talk a little bit about the economy and what we're expecting this year. I think it's going to be really important, and you've heard me say this before: It's a good time to have your noise reduction headphones on. Pay attention to the data. Don't pay attention to a lot of what people are estimating could happen, what is happening. I think that's critical.
I look at last year and it's a great example and something I've been talking about in presentations recently. But you could see the International Monetary Fund in April once we had Liberation Day and that announcement of tariffs.
Around the globe, you found that the International Monetary Fund took their forecasts for global GDP from 3.3% to 2.8%. And lo and behold, as we got to July, they had moved it back to 3%. We get to October and they moved it back to 3.2%. And when we got to December, and we now have final data in January, they're back at the 3.3% they started at.
That's not to give any criticism to the people trying to forecast that. It was all unknown, and we didn't know what was going to happen. But what we found going through the year is we did not have the instability we expected tariffs to be having for a variety of reasons. And that could be a whole other section of this conversation. But I just wanted to point out that is a positive, and if you look at the International Monetary Fund forecast moving forward, it's steady. It's 3.3 and 3.3, 3.2 as far as ‘26, ‘27, ’28 what we're expecting. You look at the United States; nice and steady at about two and a half. Those are all the forecasts and around the globe it's the same steadiness.
So, I guess that's the message that we're expecting from an economic perspective is steady. We didn't have steady, so this is going to be something that's positive. And again, it doesn't quite feel that way, but that's a real positive number. And if you look at what's going on here in the United States, the same thing is that we started down in GDP in Q1; Q2, we grew to 3.8%; Q3 was just revised, a 4.4% growth. The Atlanta Fed, in its last estimation, was expecting Q4 to be at 5.4%, but it'll be somewhere over five in their anticipation. That is an economy here in the United States that’s on fire, realistically. And again, it doesn't feel that way. It doesn't mean we don't have headwinds; doesn't mean we don't have challenges.
It just means there's a lot of good behind it and that's stability. Then you add to that the ‘Big Beautiful Bill’ that was passed – and I always say I didn't call it ‘beautiful, that’s the actual name of the bill. – but the ‘Big Beautiful Bill’ that was passed last year is now going into effect. One of the biggest impacts is there's going to be about $45 billion in extra tax refunds that are going back to U.S. citizens. That's a real positive because that will be a stimulus in the economy. What we've always seen is most of that gets spent or a large majority of it gets spent. So that is a stimulus. Oxford Economics took a look at that bill, and they've actually scored the bill as a 1% GDP head start for the year.
That's again, all positive news. I think we're also in a very interesting time frame that you keep hearing about low hiring, low firing environments, and it's going to be an interesting environment. There's a lot of noise in the numbers, so I think it's going to take everybody's patience and to be deliberate and understanding what is happening as we kind of remake our economy and a global trade system.
Some of what's going on in the US with net migration, or net immigration actually, has an impact in those numbers and how we read them, and we just don't know how that all washes out yet. So, I think it's really important to take all of that with a little bit of a grain of salt.
Two other good points that that I see that are exciting is one, rents are falling dramatically in the United States, and it's a dramatic, drastic fall in a very short time frame. But what we have seen, and this came from Bank of America and the Bank of American Institute and their latest readings, and this one was in October, but what you found was a large spike of spend by renters, and a large majority of Americans rent today, and those renters are having more money in their pocket.
Again, disposable income is good for all of us, good for the economy, and definitely good for our industry.
And lastly, I will remind you that when you see January data and first quarter data, we're going to have a lot of noise in the data, and we're going to have to keep that in mind. We've just had two major storms at the time of this filming here in February, and it was actually January, February that we had the storms. But the impact was dramatic and that's going to have a major impact to airline readings and report outs, some hotel report outs. Because there was impact, we canceled 15,000 flights with the first storm that impacted almost 60% of the United States. And those 15,000 flights, you're talking about, flight cancellations that were on par with COVID, so it's just important to remember that we're not going to be able to read a lot of trends out of the data coming out of the first quarter, and not to overread it. That's my advice to everybody. We're going to have to be really slow and cautious on how we're looking at the numbers. January is going to be noise. February should hold pretty firm as long as we don't have any other major storms. But overall, I'm pretty bullish on where the economy is.
Again, we have a lot of headwinds and a lot of noise out there. But overall GDP is strong. Hiring is slow and steady. And what we're trying to find out is, is that the new baseline, you know, 20,000 to 50,000 new jobs every month, the new baseline, specifically with what's going on with net immigration.
So more to come. We're going to continue to study this throughout the year. But hopefully, this gives you a little bit of insight on how to maneuver, at least through the first quarter.