Goldman Sachs anticipates a mere 1% increase in the U.S. GDP for 2025, indicating a potential near miss of recession fueled by rising unemployment and inflation. The analysis suggests that stagnation in consumer demand, which constitutes roughly 75% of GDP, will drop business investments as access to loans tightens. The University of Michigan's Consumer Confidence Index reflects growing caution among consumers. Economists worry that tariffs, viewed as inflationary, could exacerbate these issues, impacting consumer prices and stunting growth through a potential tariff-driven recession, particularly affecting key sectors like automobiles and housing.
"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."
"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."
"GDP growth of 1% means the economy is at risk of going into recession. Recessions almost always cause a sharp drop in stock prices."
"Goldman's pessimism is driven by an expectation of the effects of tariffs. Consumer demand causes a drop in GDP and lowers business capital investments."
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