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U.S. 2ND-HALF GDP INCREASE SEEN SAME AS FIRST HALF - Goldman Sachs

U.S. gross domestic product rose 1.1% on an annualized basis in the first half of the year and a similar pace is expected in the second half, according to economists at Goldman Sachs, adding that while layoffs have been limited, job creation is near "stall speed."

The firm expects the Federal Reserve, starting in September, to deliver three consecutive 25-basis-point cuts, "provided inflation expectations remain in check amidst worries about Fed independence," Goldman Sachs economist Jan Hatzius says in a note from late Monday.

The firm sees tariff-related price increases offsetting a "boost from easier financial conditions," and it notes that consumer spending trends "look shaky."

"While we don't expect the 'letter tariffs' scheduled for August 1 to take effect, we now build in an increase in the 'reciprocal' tariff rate from 10% to 15%," Hatzius writes.

U.S. President Donald Trump, who began his global trade war in early April, might raise tariffs further because so far the costs of the trade war have been smaller than anticipated, he notes.

"A return to Fed easing should push down US Treasury yields and the dollar while boosting global equities and gold," he adds.

Goldman estimates that a 30% U.S. tariff on imports from Europe would trim 0.5% from Euro-area GDP by the end of 2026, while the firm says with China's GDP beating consensus expectations in the second quarter, its full-year 2025 forecast has inched up to 4.7%.

(Caroline Valetkevitch)

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