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We estimate that US GDP rose just 1.1% (annualized) in H1 and expect a similar pace in H2, as a real income hit from tariff-related price increases offsets the boost from easier financial conditions. Although weakness in labor supply has so far kept the unemployment rate stable and layoffs limited, the growth slowdown has brought job creation close to “stall speed” and kept our 12-month recession risk estimate at 30%. Starting in September, we expect the FOMC to deliver three consecutive 25bp cuts, provided inflation expectations remain in check amidst worries about Fed independence. Barring another major tariff shock, we see steady non-US growth, but the surge in China's current account surplus signals a deeply unbalanced economy.

US Consumer Spending Has Stagnated in H1

Source: Bureau of Economic Analysis, Haver Analytics, Goldman Sachs Global Investment Research

21 July 2025 | Research | Economics - Jan Hatzius

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