Goldman Sees 2026 US Growth Accelerating as Fed Rate Cuts Loom

This article first appeared on GuruFocus.

Goldman Sachs (NYSE:GS) economists see the US economy getting a fresh lift in 2026 as tax cuts, real wage growth and rising household wealth support activity, while inflation continues to cool. In the bank’s Jan. 11 US Economic Outlook, economists said consumer spending should grow at a steady pace, helped by policy support and improving purchasing power, even as the overall drivers of growth begin to shift compared with the last cycle.

With the labor-market outlook becoming less predictable, Goldman expects the Federal Reserve to deliver two additional 25 basis-point rate cuts in June and September. The bank projects GDP growth of 2.5% in 2026 on a Q4/Q4 basis, or 2.8% for the full year, exceeding the 2% growth expected by economists surveyed by Bloomberg in mid-December. Core PCE inflation is forecast to ease to 2.1% year over year by December, with core CPI slowing to 2%, while the unemployment rate is seen stabilizing at 4.5%, though economists warned there is a risk of a period of jobless growth as companies increasingly use artificial intelligence to lower labor costs.

Goldman expects business investment to emerge as the strongest component of GDP growth in 2026, supported by easier financial conditions, reduced policy uncertainty and tax incentives. Chief US economist David Mericle said productivity growth could play a larger role than in the prior cycle, potentially boosted by artificial intelligence, while labor supply growth slows as immigration remains lower. On trade policy, the bank assumes that cost-of-living concerns ahead of the mid-term elections could discourage the White House from implementing significant additional tariff increases, helping sustain the US economy’s relative outperformance versus other developed markets.