Goldman Sachs Updates US Economic Indicators: Financial Conditions Ease, Q3 GDP Forecast at 2.4%
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Goldman Sachs Updates US Economic Indicators: Financial Conditions Ease, Q3 GDP Forecast at 2.4%
Goldman Sachs released an update on its proprietary US economic indicators, showing a decline in the Financial Conditions Index, improvement in the Activity Indicator, and maintaining its forecast for Q3 GDP growth of 2.4% quarter-over-quarter annualized.
- The nominal GS US Financial Conditions Index eased by 5.9 basis points last week to 98.74, mainly due to a weaker US dollar.
- The real GS US Financial Conditions Index eased by 8.9 basis points to 98.37.
- Goldman Sachs forecasts Q3 GDP growth of 2.4% quarter-over-quarter annualized.
- The US MAP Economic Surprises Index declined to +0.3; the preliminary July Current Activity Indicator was 3.9%, above June's 3.1%.
Report interpretation
Overview
This report is a Goldman Sachs update on US economic indicators, summarizing its proprietary Financial Conditions Index, GDP forecast, Economic Surprises Index, Current Activity Indicator, and tracking indicators for capital expenditure, employment, manufacturing, non-manufacturing, wages, core inflation, and economic sentiment on social media.
Core views
The report's core message is that US financial conditions have eased marginally, while short-term growth tracking indicators improved from the previous month. However, the Economic Surprises Index is only slightly positive, indicating that the extent to which data has exceeded expectations remains limited. Overall, the report takes a moderately constructive view of near-term US economic momentum.
Analysis framework
The report uses Goldman Sachs' proprietary high-frequency and monthly macroeconomic indicator framework to track financial conditions, growth, the labor market, wages, inflation, and sentiment, while using indexed indicators to observe changes in macroeconomic momentum.
Methodology notes
Financial Conditions Index
Measures the combined impact of financial variables such as interest rates, the US dollar, and asset prices on the economy through nominal and real Financial Conditions Indices.
Current Activity Indicator
The first principal component of 37 key weekly and monthly US economic indicators, used to estimate the immediate momentum of economic activity.
Economic Surprises Index
Measures the extent to which US economic data has exceeded or fallen short of expectations on a net basis.
Wage and Core Inflation Trackers
Tracks labor costs and price pressures through wage surveys, labor market tightness, and core inflation-related indicators.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- US Interest RatesInfluenced by financial conditions, growth, and inflation expectations
- Strengths
- Easier financial conditions and improving growth indicators provide signals of economic resilience.
- Weaknesses
- If inflation or wage pressures persist, the scope for lower interest rates may be limited.
- Comparison
- Compared with relying on a single economic data point, this report uses multiple proprietary Goldman Sachs indicators for comprehensive tracking.
- Risks
- Economic growth or inflation data deviating from expectations could trigger renewed repricing of interest rates.
- US DollarA weaker US dollar was one of the key factors behind the easing in financial conditions this week
- Strengths
- A weaker US dollar can ease financial conditions and support expectations related to external demand.
- Weaknesses
- The US dollar is jointly influenced by interest-rate differentials, risk appetite, and policy expectations.
- Comparison
- The report directly identifies the weaker US dollar as the primary source of the easing in financial conditions.
- Risks
- A renewed strengthening of the US dollar could reverse part of the easing in financial conditions.
- US Risk AssetsIndirectly influenced by changes in growth momentum and financial conditions
- Strengths
- Easier financial conditions and improving economic activity generally improve risk appetite.
- Weaknesses
- The report does not provide direct investment recommendations at the industry or individual-stock level.
- Comparison
- This research focuses on macroeconomic themes and does not differentiate the performance of specific companies.
- Risks
- A decline in economic surprises, renewed inflation, or changes in policy expectations could weigh on valuations.
Key data
- Nominal GS US Financial Conditions Index98.74Eased by 5.9 basis points last week, mainly due to a weaker US dollar.
- Real GS US Financial Conditions Index98.37Eased by 8.9 basis points last week.
- Q3 GDP Forecast2.4%Quarter-over-quarter annualized.
- US MAP Economic Surprises Index+0.3Declined to a slightly positive level.
- Preliminary July Current Activity Indicator3.9%Above June's 3.1%.
Impact & implications
Easier financial conditions and improving economic activity indicators are generally supportive of near-term growth expectations and may affect the pricing of interest rates, the US dollar, and risk assets. However, the decline in the Economic Surprises Index indicates that markets remain sensitive to further improvements in the data.
Risks
- This report is an update on macroeconomic indicators and does not constitute direct investment advice regarding any individual stock or security.
- Economic data, financial conditions, and market prices may change rapidly after the report is published.
- If the US dollar, interest rates, inflation, or employment data deviate from expectations, the macroeconomic assessment may change.
What to watch
- Upcoming US GDP, employment, wage, and core inflation data.
- Whether the GS US Financial Conditions Index continues to ease.
- Changes in the direction of the Current Activity Indicator and MAP Economic Surprises Index.
- The direction of the US dollar and its contribution to financial conditions.