Synopsis:

Goldman Sachs expects a downward revision to Q4 GDP growth to +2.1% and a large dip in core PCE inflation to 2.54%, which should ease concerns about inflation progress. They forecast headline PCE at 0.3% MoM and 2.43% YoY. Further declines in core PCE inflation are expected in March and April, though tariff developments remain a key risk.

Key Points:

1️⃣ Q4 GDP Revision 📉

• Expected downward revision to +2.1% (from +2.3%).
• Consumer spending revised lower (-0.1pp to +4.1%).
• Business investment revised sharply lower (-0.8pp to -3.3%).

2️⃣ Core PCE Outlook 🏦

• January core PCE: Expected 2.54% YoY, signaling further disinflation.
• Headline PCE: Forecasted at 0.3% MoM, 2.43% YoY.
• Inflation should remain stable in February but dip another 10-15bps in March/April.

3️⃣ Tariff Risks Remain ⚠️

• Core PCE trajectory depends on additional tariffs and their potential inflationary impact.

Conclusion:

Goldman Sachs expects softer economic data, with a downward Q4 GDP revision and further progress on disinflation. However, tariff developments remain a key risk to the inflation outlook in the coming months.