Economy’s Huge Slowdown Expected by Goldman Sachs
Goldman Sachs is pessimistic about the prospects for gross domestic product growth in 2025. It expects tariffs to hamper the economy, likely causing a recession. The post Economy’s Huge Slowdown Expected by Goldman Sachs appeared first on 24/7 Wall St..
After years of healthy growth, which began during the COVID-19 pandemic, Goldman Sachs expects only a 1% increase in the 2025 gross domestic product (GDP). The analysis covers the period from Q4 2024 to Q4 2025. If the figure is accurate, the United States might narrowly dodge recession. Even if that happens, Goldman says unemployment will rise to 4.5% and inflation to 3.5%. Goldman’s pessimism is driven by an expectation of the effects of tariffs.
24/7 Wall St. Key Points:
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Goldman Sachs is pessimistic about the prospects for gross domestic product growth in 2025.
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Tariffs are expected to hamper the economy, likely causing a recession.
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Consumer demand causes a drop in GDP and lowers business capital investments. Access to loans gets harder, and company earnings drop. Consumer spending accounts for about 75% of GDP.
The consumer has already signaled caution. According to the University of Michigan Survey of Consumers, its index fell to 57.8 in March, down 10.5% from February. Joanne Hsu, the survey’s director, said. “Consumers from all three political affiliations are in agreement that the outlook has weakened since February.” She blamed Washington’s quick pace of change in economic policies.
A Tariff-Driven Recession?
Nearly every forecast about GDP and the consumer rests on the effects of tariffs. Most economists believe they will drive inflation, and, in some industries, this inflation will be large. One recent study of car prices showed the average price of a new car will jump by 6%. A tariff on oil will increase gasoline prices. A tariff on timber will increase the price of building houses. Nations may impose tariffs on U.S. goods in response, making them more expensive and stunting their growth overseas.
GDP growth of 1% means the economy is at risk of going into recession. Recessions almost always cause a sharp drop in stock prices. These declines cause people who own stocks to become much more cautious about spending money. As they become cautious, their buying patterns often harm GDP growth.
A tariff-driven recession depends on how broad and large the tariffs are. The Trump administration says its plan is for them to be highly aggressive. That will hamper the economy, and Goldman Sachs thinks it knows how much.
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The post Economy’s Huge Slowdown Expected by Goldman Sachs appeared first on 24/7 Wall St..
