Global economic activity, financial conditions, inflation and labor-market indicators: Goldman Sachs' activity indicators show developed-market growth remaining above potential

Overview

This is Goldman Sachs' periodic update of proprietary global economic indicators. Its central message is that activity in developed markets remains above potential, while the accompanying dashboards track financial conditions, inflation, labor-market pressure, fiscal impulses, utilization and changes to Goldman Sachs' GDP and inflation forecasts.

Core views

Goldman Sachs' headline conclusion is that its Current Activity Indicator (CAI) for developed markets is above potential, and that the global CAI also remains notably above potential. The CAI is intended to summarize the growth signal from high-frequency real-activity data in GDP-equivalent units. In the preliminary August data, the global spot CAI was +3.2% month-on-month annualized and the developed-market reading was +2.6%; their respective three-month averages were also +3.2% and +2.5%. The US reading was +3.6% versus a +3.3% three-month average, while the euro area was +1.5% versus +1.3%. The country-level update shows uneven momentum beneath the aggregate result. Norway's preliminary August CAI increased by 0.5 percentage point, whereas Canada's fell by 0.8 percentage point. Other reported spot readings included Spain at +3.2%, New Zealand at +3.6%, Sweden at +3.6%, India at +4.5%, and Brazil at +7.0%, all on a month-on-month annualized basis. The report cautions that CAIs for countries with no data released are forecasted, and that global, developed-market and emerging-market aggregates use GDP-weighted market-FX country weights. Financial conditions are a second major thread. Goldman Sachs states that its global ex-Russia Financial Conditions Index tightened by 3.8bp in the past week, primarily because of exchange rates. The report presents weekly and year-on-year FCI changes across countries, as well as FCI impulses over the next four quarters. Goldman Sachs defines these impulses as the effect of financial conditions on real GDP growth, connecting changes in rates, exchange rates and broader financial conditions to the growth outlook and monetary-policy transmission. The update also records positive growth revisions across Asia over the past 60 days and includes changes in Goldman Sachs' 2026 and 2027 GDP and inflation forecasts, together with comparisons of its global GDP forecasts against other forecasters. It does not provide the numerical forecast revisions in the available text, but the exhibits indicate that forecast changes are part of the report's monitoring framework. Inflation and labor-market conditions are assessed through a set of proprietary measures: trimmed core inflation, headline and core inflation surprise indices, wage trackers, jobs-workers gaps, wage-survey leading indicators, and short-run utilization scores. Inflation surprise indices compare actual CPI outcomes with Bloomberg consensus and aggregate country results on a GDP-weighted basis. The jobs-workers gap compares labor demand—job openings plus employment—with labor supply, while utilization combines labor-market and industrial indicators. Latest utilization readings ranged from +5.5% of potential in Spain and +4.4% in Italy to -1.5% in Canada and -1.4% in the US. Finally, the report monitors fiscal support through top-down fiscal impulses over the next four quarters. Its four-quarter measure uses average fiscal growth impulses from 2026Q1 through 2026Q4. For the US, Goldman Sachs explicitly includes both expansionary discretionary fiscal policy and the tax-like effects of tariffs in the fiscal impulse measure.

Analysis framework

Goldman Sachs combines high-frequency activity data, financial conditions, inflation outcomes relative to consensus, labor-market indicators, survey evidence and fiscal-policy measures. It aggregates country data into GDP- or market-FX-weighted global groups, then uses the resulting indicators to monitor current growth, price pressure, labor tightness and expected policy-related effects on GDP.

Methodology notes

• Quantitative, Factor, and Portfolio Theory

  Current Activity Indicator first-principal-component approach

  The CAI extracts a common growth signal from several high-frequency real-activity indicators and expresses it in GDP-equivalent units. Missing releases are initially forecasted and later replaced by actual data.

• Fixed Income and CreditThree-Factor Interest-Rate Decomposition

  Financial Conditions Index and FCI impulses

  The FCI gauges whether financial conditions are looser or tighter, while FCI impulses estimate their effect on real GDP growth. The update attributes the latest global ex-Russia tightening mainly to exchange rates.

• Event-Driven and Behavioral FinanceExpectation Gap and Expectation Management

  MAP and inflation surprise indices

  These measures compare economic and inflation releases with consensus expectations, standardize their importance across countries and aggregate the resulting surprises.

• Macroeconomics

  Trimmed core inflation

  The measure removes the one-third most extreme price changes among individual core-inflation components to focus on the underlying inflation pace.

• Industry AnalysisSupply-demand framework

  Jobs-workers gaps and short-run utilization scores

  Labor-market tightness is assessed as labor demand minus labor supply, while utilization combines labor and industrial indicators into a GDP-equivalent measure of pressure relative to potential.

• Macroeconomics

  Top-down fiscal impulses

  The fiscal impulse estimates the effect of fiscal policy on real GDP growth; the US measure includes discretionary fiscal policy and tariff-related tax-like effects.

Key data

• Global spot CAI+3.2% mom annualized in AugustThree-month average was +3.2%.
• Developed-market spot CAI+2.6% mom annualized in AugustThree-month average was +2.5%.
• Global ex-Russia FCITightened by 3.8bp last weekThe report attributes the move primarily to exchange rates.
• Norway CAI revision+0.5ppPreliminary August reading change.
• Canada CAI revision-0.8ppPreliminary August reading change.
• US short-run utilization score-1.4% of potential in SeptemberThree-month average was -1.7%.
• Spain short-run utilization score+5.5% of potential in SeptemberThree-month average was +5.5%.

Impact & implications

Goldman Sachs' indicators portray developed-market activity as still above potential while showing substantial country-level variation. Its financial-conditions, inflation, labor and fiscal dashboards are designed to track the forces that can shape the near-term GDP and inflation outlook.