Goldman Sachs has said it expects the U.S. to grow faster than consensus estimates in 2026, thanks to tax cuts, a reduced drag from tariffs, and easier financial conditions.
In a note, the analysts including Pierfrancesco Mei forecast that U.S. gross domestic product growth would be 2.5% in 2026 on a fourth quarter-to-fourth quarter basis, above Bloomberg consensus forecasts of 2.1%. For the year as a whole, GDP is seen expanding by 2.8%.
Data last week showed that the U.S. economy slowed to at a seasonally and inflation adjusted annual rate of 1.4% in the final quarter of last year, dragged down in large part by the impact of a prolonged federal government closure which ended in November. Comparing total output for 2025 against the prior year, the U.S. expanded by 2.2%, the slowest since 2020.
Economists have suggested that the while the economy appears to be split between robust spending in higher-income brackets and tepid demand among lower earnings, activity remains broadly resilient.
"The key driver of our forecast is that the drag from tariff increases should give way to a boost from business and personal tax cuts included in the One Big Beautiful Bill Act," the Goldman analysts said, referring to President Donald Trump's signature budget bill passed last year.
"Reduced policy uncertainty and easier financial conditions should also support business investment, which we expect to be the strongest component of GDP in 2026."
The comments come after the Supreme Court struck down Trump's use of emergency economic powers to impose his so-called "reciprocal" tariffs on a host of countries. Trump has responded by rolling out a temporary 10% global tariff and threatening to potentially raise the rate to 15%.
Policymakers at the Federal Reserve, meanwhile, are seen resuming interest rate reductions later this year, after having paused a recent series of drawdowns in January.
Still, the Goldman analysts warned, a potential stock market correction could weigh on consumer spending, one of the central engines of the American economy. They estimated that a 10% drop in equity prices sustained through the second quarter of this year would bring down GDP by about 0.5 percentage points.
"Our analysis suggests that a sharp equity correction represents the most significant near-term risk," the analysts said.
Disruptions from artificial intelligence also present headwinds to a labor market that has shown indications of stabilizing, they flagged, adding that an uptick in the unemployment rate could dent consumer demand as well.
Should a greater amount of costs from Trump's tariffs be saddled on consumers that could also act as a weight on growth, as could a jump in oil prices due to geopolitical tensions and risks in private lending, the Goldman analysts predicted.
"While no single downside risk above would bring the economy into recessionary territory unless the shock were very large, the simultaneous materialization of multiple risks -- particularly a combination of an equity market sell-off and AI-driven labor market displacement with limited productivity gains -- could pose more substantial growth headwinds," they wrote.
Source: Investing