Goldman Sachs US Weekly Outlook: CPI Expected to Ease Moderately, Retail Sales to Dip Slightly

Overview

This is Goldman Sachs' US weekly economic outlook for August 10-16, outlining key economic data releases and the schedule for Federal Reserve official speeches this week. The report focuses on Wednesday's CPI report and Friday's retail sales data, providing quantitative forecasts and derivations from the Goldman team for various indicators, as well as updating the third-quarter GDP nowcast estimates. The overall tone is neutral, aiming to help investors grasp the rhythm of short-term macroeconomic data and potential volatility points.

Core views

Inflation Data Outlook: Goldman Sachs expects July core CPI to rise 0.19% MoM, below the market consensus of 0.2%, with YoY growth slowing from 2.6% last month to 2.5%. By component, used car prices are expected to rise 0.5%, new car prices 0.1%, but auto insurance prices are expected to fall 0.5%, showing divergent inflation performance in the auto sector; housing inflation continues to slow, with owner's equivalent rent (OER) and rent expected to rise 0.23% and 0.16% respectively; travel services inflation is mixed, with airfares expected to rise 2% and hotels to fall 1%; communication services are expected to exert upward pressure of 1-2 basis points on core CPI due to recent price hikes. For headline CPI, it is expected to rise only 0.05% MoM, mainly reflecting food price increases of 0.2% being offset by energy price declines of 2.0%, with YoY growth expected to fall from 3.53% to 3.35%. This forecast implies a 0.26% MoM rise in the July core PCE price index; the core PCE increase exceeding core CPI is mainly because the investment portfolio management fee component is affected by the lagged transmission of second-quarter stock price gains. Consumption and Growth Data Outlook: Goldman Sachs expects July retail sales to decline 0.1% MoM, below the market consensus of +0.1%, mainly dragged down by lower gasoline prices and weak auto sales; ex-autos retail sales are expected to be flat, while core retail sales (ex-autos, gas, and building materials) are expected to grow 0.2% MoM. The moderate growth in core retail sales is partially weakened by the base effect caused by Amazon Prime Day being moved to June, which poses a drag of about 0.2 percentage points on July data. In terms of economic growth, thanks to stronger-than-expected factory orders and trade balance data, Goldman Sachs has raised its Q3 GDP nowcast estimate to +2.7% (annualized quarterly rate), with domestic final sales estimated at +2.1%; the Q2 GDP nowcast estimate remains at +1.5%. The current activity indicator for July rose to +3.6% (from +2.7% in June), indicating enhanced recent economic momentum. Fed Official Speeches and Labor Market: Several Federal Reserve officials will speak this week. Cleveland Fed President Hammack (an FOMC voting member) will appear twice on Monday and Wednesday. She voted against raising rates by 25 basis points at the July meeting, arguing that current policy is not tight enough and high inflation is a more pressing issue; her comments this week warrant close attention. Richmond Fed President Barkin (a non-voting member) will give a speech on economic prospects and monetary policy on Thursday, having previously described the labor market as in a "weak balance." In terms of data, initial jobless claims for the week ending August 8 are expected to be 200,000 (previous 199,000), with continuing claims consensus at 1.8 million. Additionally, the preliminary University of Michigan August consumer sentiment index is expected to be 55.0 (previous 55.2), with 5-10 year inflation expectations expected to remain at 3.3%.

Analysis framework

The Goldman Sachs team uses a bottom-up component decomposition method for data forecasting. For CPI, instead of simply giving a total judgment, they estimate the monthly changes of key components such as used cars, new cars, auto insurance, housing rent, travel services, and communication services one by one, then sum them up to derive core and headline CPI forecasts, and further deduce the trend of core PCE and the sources of its difference from CPI. For retail sales, adjustments are made based on industry high-frequency data and special calendar effects (such as the timing mismatch of Amazon Prime Day). The GDP nowcast is updated in real-time using a Nowcasting model based on published hard data (factory orders, trade balance, etc.). The core of this analysis lies in identifying structural divergence within the data rather than relying on simple trend extrapolation.

Methodology notes

• Macroeconomic frameworkPrice-Volume Decomposition

  CPI Component Decomposition Forecasting Method

  Estimate the monthly MoM changes for CPI sub-items such as housing, autos, travel, and communication one by one and sum them up, rather than directly forecasting the total. This method can capture differentiated changes in driving factors for each component (e.g., housing cooling but auto insurance falling), improving forecast accuracy, and is a standard practice for institutional inflation data forecasting.

• Macroeconomic frameworkBusiness Cycle Turning Point Analysis

  Real-Time Tracking of GDP Nowcasting

  Use already published high-frequency hard data (such as factory orders, trade balance, employment, etc.) to estimate the current quarter's GDP growth in real-time through statistical models, dynamically updating as new data is released. The upward revision of the Q3 GDP nowcast estimate in the report stems from this method, helping investors grasp changes in economic momentum before the official GDP release.

• Macroeconomic framework

  Calendar Effects and Base Adjustments

  When forecasting data such as retail sales, it is necessary to consider the distortion caused by the time misalignment of special events (such as Amazon Prime Day moving from July to June) on YoY and MoM readings. Institutions estimate the quantitative impact of such effects (e.g., a drag of about 0.2 percentage points) through historical patterns to avoid misjudging the true consumption trend.

Key data

• July Core CPI MoM Forecast+0.19%Goldman Sachs forecast, market consensus +0.2%, previous value flat
• July Core CPI YoY Forecast+2.47%Slowing from previous +2.6%, rounded to 2.5%
• July Headline CPI MoM Forecast+0.05%Goldman Sachs forecast, market consensus +0.1%, previous -0.4%
• July Headline CPI YoY Forecast+3.35%Significant slowdown from previous +3.53%
• July Retail Sales MoM Forecast-0.1%Goldman Sachs forecast, market consensus +0.1%, previous +0.2%
• July Core Retail Sales MoM Forecast+0.2%Excluding autos, gas, and building materials, market consensus +0.3%
• Q3 GDP Nowcast Estimate (Annualized Quarterly Rate)+2.7%Revised up from prior, Q2 nowcast estimate was +1.5%
• July Current Activity Indicator+3.6%June was +2.7%, indicating enhanced economic momentum
• University of Michigan Consumer Sentiment Index (August Preliminary)55.0Goldman Sachs forecast, market consensus 54.6, previous 55.2
• Initial Jobless Claims Forecast (Week Ending 8/8)200kMarket consensus 202k, previous 199k

Impact & implications

If CPI data eases moderately as Goldman Sachs predicts, it will further consolidate market confidence in the downward trend of inflation. However, hawkish speeches from officials like Hammack may offset the positive data, reminding the market that policy分歧 still exists. If the slight decline in retail sales is confirmed, combined with the fading base effect of Prime Day, it may trigger discussions on the阶段性 resilience of consumption, but the positive growth in core retail sales still supports the narrative of strong domestic demand. The upward revision of the Q3 GDP nowcast estimate indicates that despite fluctuations in some monthly data, the overall expansion momentum of the US economy has not weakened, providing underlying support for risk assets and the US dollar.

Risks

• Uncertainty in CPI component forecasts; if housing or services inflation stickiness exceeds expectations, it could cause overall readings to deviate from forecasts
• The base effect of Amazon Prime Day's timing mismatch on retail sales is difficult to quantify precisely, and the actual drag may be greater or less than 0.2 percentage points
• Fed official speeches may release unexpected hawkish or dovish signals, causing sharp fluctuations in market interest rate expectations

What to watch

• Market re-pricing of the Fed's rate cut path after Wednesday's CPI data release
• Cleveland Fed President Hammack's latest statements on her hawkish stance during her two speeches on Monday and Wednesday
• Actual performance of the auto and gasoline components in Friday's retail sales data
• Whether there are marginal changes in 5-10 year inflation expectations in the University of Michigan consumer survey