• Goldman Sachs revised its Q3 2025 U.S. GDP growth forecast down to 1.6% (q/q annualized), a 0.1 percentage point cut.
  • The downgrade was primarily driven by an unexpected surge in the U.S. trade deficit, which widened to $1.036 trillion, $126 billion above consensus.
  • Despite the external trade drag, domestic demand remains steady with core inflation readings in line with expectations and wage growth holding at 3.9% annualized.

Goldman Sachs economists have slightly tempered their near-term outlook for the U.S. economy, lowering their third-quarter GDP tracking estimate to 1.6% annualized growth. The revision, a reduction of 0.1 to 0.2 percentage points from prior estimates, follows the release of July trade data that showed a sharper-than-anticipated deterioration in the trade balance.

The primary culprit was a significant jump in imports, particularly industrial supplies and goods from China, which overwhelmed export growth. This pushed the overall deficit well beyond what analysts had projected. The widening gap suggests that net exports will be a more substantial drag on Q3 growth than previously modeled. People familiar with the bank's modeling noted that the negative impact from trade was enough to offset otherwise stable underlying economic indicators.

Domestic final sales, a key gauge of underlying demand, held steady at 0.7% for the quarter. This resilience, coupled with moderate inflation data, prevented a more severe downward revision. Core PCE inflation for July came in at 0.27% month-over-month and 2.88% year-over-year, aligning perfectly with both market consensus and Goldman's own projections. Furthermore, productivity gains are providing a buffer, with Q2 nonfarm productivity rising 3.3% while unit labor costs increased a modest 1.0%.

Labor market data presents a mixed but largely stable picture. Private sector employment increased by 54,000 in August, a figure that was slightly below expectations. Initial jobless claims saw a modest rise, with the increases reportedly concentrated in states like Connecticut and Tennessee, according to sources familiar with the weekly data. Wage growth remained firm at an annualized rate of 3.9%.

The forecast revision underscores the U.S. economy's continued sensitivity to trade flows, which have been volatile amid ongoing geopolitical tensions and anticipatory corporate behavior. There are indications that companies engaged in precautionary stockpiling of imports ahead of potential new tariffs, a dynamic that can artificially inflate deficit figures in the short term. A spokesperson for Goldman Sachs did not immediately respond to a request for further comment on the forecast adjustment.

Looking ahead, the bank's economists project a rebound in growth to 2.5% for the full year 2025, contingent on the trade deficit normalizing and domestic demand maintaining its current momentum. For now, the Q3 snapshot reveals an economy being tugged in two directions: solid fundamentals at home are being challenged by a less favorable balance of trade abroad.