Goldman Sachs(US:GS)2026-01-19 02:32Summary of Economic Data Surprises and Market Reactions in 2025 Industry Overview - The report focuses on the US economy, analyzing economic data surprises, forecasting performance, and market reactions related to growth and inflation in 2025 [1][2]. Key Points Economic Growth - The US GDP is projected to have increased just under 2.5% Q4/Q4 in 2025, aligning with the initial forecast of 2.4% and surpassing the consensus forecast of 1.9% [3][4]. - Initial growth forecasts were lowered by 1.9 percentage points due to anticipated large tariffs, but were later adjusted upward after the most disruptive tariffs were scaled back [4][5]. Inflation - The core PCE price index increased by approximately 2.8% Q4/Q4 in 2025, which is higher than the forecast of 2.4% and reflects a modest progress in disinflation [12][16]. - The overshoot in inflation is attributed to larger-than-expected tariffs, contributing an estimated 60 basis points to the year-on-year rate [12][16]. Forecast Performance - The hit rate for economic indicator forecasts averaged 71% in 2025, slightly above the 64% average since 2017, with notable accuracy in GDP (100% correct) and core CPI (90% correct) [16][22]. - The performance lagged for the ISM manufacturing index, achieving only a 44% hit rate, indicating overly optimistic forecasts for manufacturing surveys [22][29]. Market Reactions - Market sensitivity to inflation data surprises was notably high, with stock market reactions at 1.5 times the normal level and bond market reactions at 2.6 times the historical average [29][33]. - The relative importance of the unemployment rate in market reactions has increased, with an estimated 80% weight on unemployment surprises compared to 20% on nonfarm payrolls, reflecting uncertainty in labor market conditions [36][39]. Economic Indicators - The report includes various economic indicators such as consumer expenditures, business fixed investment, and housing market statistics, projecting a mixed outlook for these areas in 2025 and beyond [43][44]. - Notable projections include a decline in residential fixed investment by 2.1% and an increase in business fixed investment by 4.1% in 2025 [43]. Additional Insights - The report highlights the impact of frontloading imports ahead of tariff increases, which distorted GDP measurements due to the differing treatment of imports and inventory investments [8][9]. - The economic outlook for 2026 suggests potential moderation in market reactions due to expected healthy growth and lower inflation, but uncertainties in the labor market may keep reactions elevated [39]. Conclusion - The analysis provides a comprehensive overview of the US economic landscape in 2025, emphasizing the interplay between tariffs, inflation, and market reactions, while also highlighting the forecasting accuracy and challenges faced by analysts in predicting economic trends.