RSM Cuts US GDP Forecast to 1.7% for 2026 — Iran War Energy Shock + Tariff Uncertainty Cited as Primary Drivers

RSM US, a leading economic advisory firm, lowered its 2026 US GDP growth forecast to **1.7%** — down from a prior estimate that had assumed more normalized energy markets. The revision cites the sustained Iran war energy shock (Brent crude ~$104/bbl — 55%+ above pre-war levels) and persistent tariff uncertainty as the primary drags on US growth momentum. The RSM forecast of 1.7% for 2026 sits significantly below: - **IMF WEO April 2026:** 2.3% US growth (reference scenario) or lower under adverse/severe oil shock scenarios - **Blue Chip Economic Indicators consensus:** ~1.9–2.1% - **Goldman Sachs baseline:** ~2.0% Key factors cited in the RSM downgrade: 1. **Energy inflation persistence:** With Brent crude ~$104 on May 11 (bouncing from the $101 May 8 close on renewed ceasefire fears), the energy price pass-through to services and goods inflation is broader than initially modeled 2. **Tariff uncertainty overhang:** Despite Q1 2026 GDP advance of +2.0%, the forward-looking headwinds from the 104%/84% US-China tariff bilateral barrier are not yet fully captured in Q1 data (which includes Jan-Feb export front-loading) 3. **Consumer confidence collapse:** Michigan Consumer Sentiment Final April confirmed at ~47.6 (all-time record low — below the 1980 energy crisis nadir of 51.7); year-ahead inflation expectations at 4.8% (largest one-month jump in 70+ year survey history) 4. **Federal government drag:** DOGE-related federal payroll cuts (-9K in April alone) and contractor reductions are creating an ongoing public sector headwind; cumulative federal job losses ~45-55K since January 2026 At 1.7% growth with core PCE at 3.2% and rising, RSM is effectively forecasting a 'stagflation lite' scenario — below-potential growth with above-target inflation — that is the worst policy combination for the incoming Warsh Federal Reserve.