“The Big Money Show” panel analyzes falling gas prices, record stock gains and why strong economic data is confusing critics.
The resilience of the U.S. economy in 2025 is expected to continue as the calendar turns to 2026, with growth expected to accelerate as tax cuts and more favorable financial conditions take hold and headwinds from rates and inflation diminish, according to Goldman Sachs.
Goldman Sachs Economists led by Jan Hatzius wrote in their 2026 outlook that this year’s economic growth was dampened by the impact of higher-than-expected tariffs, which pushed the average effective tariff on US imported goods several percentage points higher than expected.
“While the tailwinds driving the U.S. economy ultimately trumped rates as we predicted, it didn’t always look that way and the estimated growth rate of 2.1% fell short of our forecast by 0.4 percentage points,” they wrote. “Our explanation for the shortfall is that the average effective rate rose by 11 percentage points, much more than the 4 percentage points we assumed in our baseline forecast, but slightly less than the 14 percentage points we assumed in our downside scenario.”
Goldman economists see the The US economy is growing faster in 2026, with the company predicting real GDP growth of 2.6%, above the Bloomberg consensus of 2%. That continues a post-pandemic trend of optimism around the U.S. economy compared to consensus forecasts.
THE US economy grew much faster than expected in the third quarter, a delayed report shows
Goldman Sachs’ 2026 outlook shows an acceleration in US GDP growth, although the labor market is expected to remain stagnant. (Michael Nagle/Bloomberg via Getty Images)
Goldman predicts that US economic growth will accelerate in 2026 due to three factors. One of these is reduced rate pressure, as the report notes that the 11 percentage point increase in the average effective rate increased by 0.6 percentage points US GDP in the second half of 2025, but if rates “remain largely unchanged from now on, this impact will likely fade in 2026.”
The tax cuts and the reforms included in the One Big Beautiful Bill Act (OBBBA) are the second force expected to drive faster economic growth in 2026.
Goldman Sachs economists estimate that consumers will receive an additional $100 billion tax refunds in the first half of next year, which corresponds to approximately 0.4% of annual disposable income. Additionally, they note that OBBBA’s corporate tax provisions allowing full spending on plant and equipment expenditures “have already begun to boost forward-looking capex indicators.”
THE US ADDED 64,000 JOBS IN NOVEMBER AFTER LOSS OF 105,000 IN OCTOBER, DELAYED REPORT SHOWS
The third factor influencing the forecast of faster economic growth in 2026 is more favorable financial conditions due to interest rate cuts by the Federal Reserve, as well as deregulation and the progress of the economy. artificial intelligence (AI).
While Goldman Sachs’ full-year outlook sees faster economic growth, this does not translate into significant improvement in the labor market, which has cooled through 2025 amid economic uncertainty due to tariffs, immigration changes and federal government downsizing.
The unemployment rate rose from 4.1% in June to 4.6% in November and while some of that may have been due to the government shutdown, the analysis noted that the labor market had begun to cool in the middle of the year prior to the shutdown and the trend as such cannot be ignored.
INFLATION REMAINS ELEVATED IN NOVEMBER AS THE FED CONSIDERS PAUSING RATE CUTS
According to Goldman’s outlook, the country still won’t see the biggest productivity benefits from AI for a few years, and while it sees US unemployment stabilizing at around 4.5% in 2026, the economists added that “we don’t see a meaningful decline in the near term.”
“In fact, we can easily imagine further increases in unemployment in the near term if productivity-boosting AI applications arrive faster than expected, or if corporate management teams increase their focus on lowering labor costs by 2026,” Goldman economists wrote.
The annual outlook also shows progress lowering inflation after recovering to almost 3% over the course of 2025. Goldman economists noted that “the main reason why core PCE inflation has remained at a high 2.8% through 2025 is the pass-through of tariffs,” and that without tariffs, inflation would have fallen to around 2.3%.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The Goldman economists said that while the rate transmission A modest increase from around 0.5 percentage points now to 0.8 percentage points by mid-2026 – assuming rates remain at roughly their current levels – will reduce the impact on inflation in the second half of next year, allowing core PCE inflation to fall to just above 2% by the end of 2026.
