4 January 2026 | 5:40PM EST Economics Research US ECONOMICS ANALYST 2026 Inflation Outlook: Traveling Toward Target Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. c45a43530f604d12bcb9a82b5aa6b9f6 n Progress on core PCE inflation stalled this year at 2.8% ...

4 January 2026 | 5:40PM EST Economics Research US ECONOMICS ANALYST 2026 Inflation Outlook: Traveling Toward Target c45a43530f604d12bcb9a82b5aa6b9f6 Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. c45a43530f604d12bcb9a82b5aa6b9f6 n Progress on core PCE inflation stalled this year at 2.8% year-over-year, still noticeably above the F ...

Labor Market & Economic Growth - The labor market shows weakness with the highest unemployment rate and lowest year-over-year wage growth in four years [2] - Despite weak job growth, the economy is still moving forward, avoiding a recession, but is described as a "sickly tortoise" [3] - The economy is expected to experience weak fourth-quarter GDP growth, potentially around 1% [9] - The economy may grow at 3% in the first half of next year and 1% in the second half, resulting in approximately 15% growth for the year if a recession is avoided [8] - Labor supply is limited, with a shrinking native-born working-age population and near-zero net immigration, making it difficult for the economy to grow beyond 15% of trend rates [7][8] Consumer Spending & Fiscal Stimulus - Consumer spending is expected to increase in the first half of next year due to income tax refunds, with the average refund projected to be $4,000, up from $3,200 this year [4] - The boost in consumer spending from tax refunds is considered temporary ("sugar, not protein") and unsustainable in the second half of the year [6] Investment & Sector Performance - While there's a significant data center boom, other investment spending, such as heavy truck sales and home building, is weak [10][11] - Low oil prices are hindering drilling activity in the energy sector [11]

Wage growth for the lowest-paid workers is starting to slow as a worsening jobs market undercuts the bargaining power of a section of the workforce that has proved resistant to the Bank of England’s inflation-fighting efforts, new data shows https://t.co/Leh8JknscY ...

So, President Trump is in Pennsylvania to talk about the economy and the report card though that he's giving his own economy is A+ plus. >> I wonder what grade you would give >> A+ A+. >> Yeah, A++.>> But talking to folks on the ground, including a great many of his biggest supporters, they're not quite grading on the same curve. What report card would you give the current economy. >> The current economy got a D. A >> D.I'd give it um All right. >> B plus. What report card would you do.>> C minus. >> I thin ...

Core Points - President Trump's new executive order exempts over 100 food and grocery items from reciprocal tariffs, which is seen as a common-sense approach given the U.S. does not produce many of these items domestically [1][2] - The focus on inflation is highlighted, with a specific mention of the inflation rates under Biden compared to Trump, indicating a significant increase in grocery prices and overall inflation during Biden's administration [4][8] - The discussion includes the complexities of beef pricing compared to chicken, emphasizing the longer supply chain for beef and its susceptibility to factors like drought [5][6] Inflation and Economic Growth - Cumulative inflation under Biden is reported at 21.3%, while under Trump it was about 3% [8] - Grocery prices have increased nearly 24% under Biden compared to 2.7% under Trump [8] - Wage growth is noted to be outpacing inflation this year, with a 4.2% rise in wages versus approximately 3% inflation [8][9] - Concerns are raised about the potential impact of the Schumer shutdown on GDP growth, estimating a reduction of 1 to 1.5 percentage points [10] Policy and Messaging - The importance of addressing inflation and affordability is emphasized, with a commitment to explain sector-specific improvements [10][11] - The healthcare sector is critiqued for benefiting middlemen rather than directly aiding consumers, indicating a need for reform [12]

Core Viewpoint - The upcoming quarterly wage price index is critical for determining the likelihood of an interest rate cut in Australia, with a figure below 3.4% potentially reigniting discussions for a cut in the first half of 2026 [1][2][4]. Wage Growth and Interest Rates - The wage price index currently stands at 3.4%, which aligns with market consensus and the Reserve Bank's forecast, indicating limited chances for a rate cut if this figure is maintained [1][6]. - Wage growth peaked in late 2023 at over 4%, but has since moderated to 3.4%, still higher than much of the past decade [6][10]. - A higher wage growth figure would diminish the prospects for an interest rate cut, suggesting that the current cycle of cuts may have reached its bottom [2][6]. Central Bank and Economic Indicators - The Reserve Bank of Australia (RBA) maintained the cash rate target at 3.6% in October due to higher-than-expected consumer price index inflation at 3.2% [8]. - The RBA's recent meeting minutes are expected to reflect a lack of enthusiasm for further rate cuts, as indicated by Governor Michele Bullock [7]. Banking Sector Scrutiny - Upcoming committee hearings in Canberra will question leaders from the big four banks regarding their practices, including interest rates and their impact on customers and employees [9][12]. - The committee aims to address concerns about the banking system's scrutiny and the timing discrepancies between RBA decisions and bank rate adjustments [12][13].

Core Insights - Growing pessimism among Americans regarding job security and inflation concerns is highlighted in the latest All-America economic survey [1][5] - A significant portion of the public expresses worry about job loss, with 26% concerned, an increase from previous surveys [2] - Despite job loss concerns, 58% of respondents feel confident about finding a similar job if needed [2][3] Job Security Concerns - 51% of the public is not worried about job loss or finding a new job, while 19% express concern [3] - Black and Latino adults show higher levels of concern and lower confidence compared to white adults, with 61% of white adults feeling confident [3] - Women and college graduates also exhibit elevated concerns regarding job security [4] Inflation and Wage Outlook - 75% of Americans report rising prices, with 50% stating that prices are increasing faster than usual [4] - Only 31% of the public anticipates wage increases in the coming year, with just 8% expecting actual increases, marking the lowest outlook since 2021 [5] - The combination of job concerns, rising prices, and stagnant wages contributes to a negative sentiment about the economy, impacting political approval ratings [5] Economic Sentiment and Partisanship - Economic sentiment is more negative among Democrats compared to Republicans, with independents also trending negatively on economic issues [7]

Economic Disparity - The US economy is experiencing a K-shaped recovery, with higher-income Americans trending upward while lower-income Americans trend downward [2] - The pay gap between higher and lower-income Americans is at its highest ever, with a nearly 530% pay difference [3] - Wealth inequality is evident in stock ownership, with the wealthiest 1% of households owning about 40% of stocks and the next 19% owning nearly 50% [4] Consumer Spending - Overall consumer spending is strong, but driven largely by higher-income Americans [2] - Spending growth for higher-income households was up 220% in August compared to a 030% year-over-year increase for lower-income households [2] - After-tax wage growth for lower-income households was up 090% year-over-year in August, while for higher-income households, it was up 360% [2] Market Sentiment - Conflicting headlines about economic growth, strong spending, stagnant labor market, and rising prices are contributing to consumer sentiment [1][4]

Labor Market Trends - The US economy has lost 1.2 million jobs since April 2024 [1] - The quits rate is down to about 2% after fluctuating since the pandemic [1] - Employers are hiring at the slowest pace since 2013, excluding the pandemic dip and rise [1] - Almost 1 in 5 job seekers surveyed said they're not confident that they will find a great job that they like [5] - A natural attrition of 20% in a company is mentioned [8] Employee Engagement & Productivity - Four out of five employees surveyed said they're not thriving at work [3] - 58% of US professionals surveyed believe they have a wide range of skills that are being underutilized in their current roles [3] - Employee disengagement adds up to about $5 million a year in lost productivity for a typical 1000 person company [12] - The average disengaged worker could cost the company $4,000 over the course of a year, while an executive could cost $20,000 [12][13] - Globally, low employee engagement is estimated to cost $9.6 trillion annually, or around 9% of global GDP [16] Wage & Bargaining Power - Wage growth has cooled, and job switching premiums have shrunk [6] - The minimum wage has been sitting at the same level since 2009 [19] - Workers have lost a bit of their bargaining power in the current environment [20]