2025 Economic Outlook and the Impact on Your Donor Base

With a new U.S. administration comes a different set of economic policy priorities. For religious institutions, it’s an especially important time to keep a close watch on changing economic conditions and how they might impact both your financial strategies and your donors.

According to the ECFA’s “2024 State of Giving” report, donations across religious institutions were flat year-over-year, largely due to the impact of inflation on donors. Mark Yoder, a partner at CapinCrouse, a leading CPA and consulting firm for nonprofit organizations, said it’s critical to understand how economic conditions can affect your donors.

“I always encourage organizations to dig down into your donor system to understand how those giving patterns change,” he said. “As you understand what's happening, it'll help you better see what's forthcoming. Understand your giver, how they're giving, why they're giving, and you'll be in a better position to navigate those budgetary constraints.”

With that in mind, Scott Anderson, BMO Capital Markets’ Chief U.S. Economist, recently offered his thoughts on the state of the U.S. economy and what we can expect in the months ahead. Following is a summary of his remarks.  

President Donald Trump has made many of his intentions clear, all of which, Anderson said, could have a profound impact on the U.S. economy as well as the global economy. Some of the risks Anderson noted include:   

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  Economic policy, including tariffs 

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  Worsening geopolitical conflicts  

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  Asset valuations in stocks, bonds and housing  

“I think we’re going to see the impacts from tax policy changes in 2026,” Anderson said. “One thing the administration wants to do is extend the Tax Cuts and Jobs Act, which is due to expire at the end of the year. Other things that could come out of left field: Certainly, immigration changes and import tariffs—including tariff retaliation from other countries—is something we have on our radar.”

Nonetheless, Anderson noted the economy entered the year on a strong footing. The unemployment rate is still historically low, and consumers continue to show resilience, which bodes particularly well for religious institutions, as their constituents are in a more favorable position to make donations.

"We've had record increases in household net worth, and increasing home prices, while a lot of service-sector jobs are still seeing good nominal wage gains,” he said. “That's allowed real incomes to pick up as energy prices and other price inflation has slowed down. That's allowed consumers to keep spending, and we think that's sustainable as we go through 2025. This is going to be really important for religious institutions and charitable giving.”  

While Anderson said there’s currently less of a risk of a significant consumer pullback, the possibility of widespread tariffs could rekindle inflationary pressures. “Unfortunately, we're starting to see a little bit of a pickup again in food inflation and commodity price inflation,” Anderson said. “There's a real concern that we may not get to the Fed’s 2% inflation target anytime soon, and that we may get stuck at around 3%, and there's a risk of even higher inflation if all the tariffs the administration has proposed get put in place for a prolonged period of time.”

Anderson said 25% tariff on imports from Canada and Mexico, and a 10% tariff on imports from China, would likely negatively impact U.S. growth. A host of goods would see price increases, including energy, transportation equipment, auto parts, semiconductors, primary metals, food processing machinery and lumber. Consumers could see higher prices for items like avocados and furniture.

“By the end of 2025, we're on the path to bring inflation down to 2.4%,” Anderson said. “But if these tariffs are put into place on Canada, Mexico and China, you're looking at close to a percentage point higher on inflation by the end of the year. And if you add in all the tax cuts in 2026 and the potential for even more tariffs, you're looking at inflation rivaling some of the peaks we saw in 2021 and 2022.”

The Federal Reserve is digesting all of these potential scenarios. Among the known metrics, Anderson pointed out that the core personal consumption expenditures (PCE) price index — excluding food and energy prices—continues to hover around 2.5%, which could hamper the Fed’s ability to cut rates further.

"The Federal Reserve will probably have to pivot to this evolving macro landscape to achieve the twin goals of full employment and stable prices,” Anderson said. “The Fed may be on hold in terms of rate cuts for the next six months or so before they get a little bit more clarity on how strong the economy is, which direction inflation is headed and what's actually going to be put in place in terms of tariffs.”

With all of this as a backdrop, we still see opportunities for growth in giving to religious nonprofits, who can articulate their need well and communicate regularly with transparency the positive impact that donations are making. It’s shaping up to be an interesting 2025, and we’re looking forward to serving well those organizations whose impact is growing the good.