Economic Snapshot: What’s Really Going On

The U.S. economy remains resilient, but the growth engines are clearly winding down. According to forecasts from Deloitte, real consumer spending is projected to rise about 2.1% in 2025, but slow further to around 1.4% in 2026. Growth in durable-goods spending is expected to decelerate sharply—only about 0.5% in 2026.

The Federal Reserve projects U.S. growth of around 1.6% for 2025, while inflation remains above target. Core inflation has fallen from post-pandemic highs but still sits above the 2% goal. Tariffs are adding cost pressure: higher effective tariff rates are contributing to slower durable goods spending and increased equipment costs.

Bottom line: The economy is not collapsing, but momentum is fading, costs are staying elevated, and uncertainty is creeping in. For veterinary practices, that means operating in a tighter-margin and slower-growth environment.

Interest Rates: High Now, But Cuts Are Expected — What That Means for Your Practice

Why interest rates are high

The Federal Reserve uses the federal funds rate to manage inflation and employment. As inflation remained high, the Fed raised rates to the 4.00%–4.50% range.

Higher rates slow borrowing and consumer spending, which helps cool inflation—but they also raise costs for business loans and leases.

For veterinary owners, this means loans, equipment financing, or credit lines are more expensive today than a few years ago.

Why you’re hearing about rate cuts

Even though rates are high now, the Fed expects to lower them later as growth slows and inflation trends down.

The Fed’s recent statements show openness to rate cuts once inflation is clearly under control—but that could take several quarters.

Market forecasts suggest the federal funds rate may drop to around 3.75% by the end of 2026 and about 3.50% in 2027.

Translation for veterinary owners: Don’t expect lower rates this year. Borrowing costs may stay elevated for another 12–18 months before easing slowly. Plan conservatively—if rates drop later, refinancing can be a bonus.

Practical implications

• When evaluating new equipment or expansions, model cash flow using current (high) interest rates.

• Compare leasing versus buying, and look closely at the

  total cost of financing.

• If rates do come down later, reassess loans for refinancing opportunities.

What This Means for Veterinary Practices

1. Cost pressures will increase

Tariffs and global trade tensions are raising input costs for many industries. Even if your veterinary supplies are domestic, indirect inflation affects your vendors. Higher wages, utilities, and rent further squeeze margins.

Action: Re-forecast your supply and equipment costs for the next 12–18 months, assuming 3–5% inflation. Track supplier price changes closely and maintain a buffer in your budget.

2. Client behavior may shift

Clients may become more price-sensitive, delaying elective or premium services. Yet pet health remains a high priority for most families—meaning they may “trade down” but not opt out entirely.

Action: Offer tiered service options and emphasize value. Educate clients about the long-term benefits of preventive care and regular visits.

3. Growth and investment decisions require prudence

With slower growth and higher borrowing costs, now is the time for disciplined expansion. Focus on optimizing existing operations before taking on major capital projects.

Action: Run scenario analysis for every major decision (base case, downside case). Use dashboards or financial tools to track performance and model ROI under conservative assumptions.

4. Efficiency and differentiation matter

When external conditions tighten, practices that use technology to increase efficiency and improve the client experience win. This includes leveraging AI and dictation tools to streamline workflows.

Action: Implement AI-powered dictation tools to reduce documentation time, improve note accuracy, and free staff for client interaction. Workflow-based AI can optimize scheduling, reminders, and communication—helping your team “do more with less.”

Tariffs: A Long-Term Context

Tariffs may not directly hit veterinary hospitals, but their ripple effects matter. Higher import costs feed into overall inflation and affect equipment and supply pricing. The OECD and Deloitte both note that trade frictions and elevated tariffs are contributing to slower global growth.

Takeaway: Tariffs are one piece of the economic puzzle. Their impact is indirect but real—contributing to cost pressure and slower spending growth.

Final Thoughts & Leadership Checklist

1. Re-forecast your next 12–18 months: Build “slow growth” and “cost-inflation” scenarios; assume rates stay high for now.

2. Monitor costs per doctor/hospital: Track supplies, labor, and profit per appointment using dashboards or financial tools.

3. Strengthen client retention and messaging: Communicate value and consistency of care, even when clients are cost-conscious.

4. Be conservative with capital projects: Delay expansion unless ROI is strong; focus on efficiency gains.

5. Leverage technology: Use AI-based dictation, automated note-taking, and workflow tools to improve efficiency and reduce burnout.

6. Engage your team: Keep staff aligned on value, communication, and efficiency—strong culture matters most in uncertain times.

   
   

In a slowing economy, the best veterinary practices don’t just survive—they evolve. By controlling costs, using technology smartly, and strengthening client relationships, your hospital can thrive no matter what the macroeconomy does.