The four indicators that the global market should pay the most attention to next

The tug-of-war between Trump and the Federal Reserve: When will it push the U.S. into a recession trap?

Goldman Sachs' latest research, by analyzing real-time data performance of 45 economic indicators, found that during periods of economic slowdown, certain indicators reflect changes in economic conditions earlier and more accurately than others. The study shows that initial jobless claims, the Philadelphia Fed Manufacturing Index, the ISM Services Index, and surprisingly, the unemployment rate, are the indicators that provide the most timely signals.

These indicators outperform other data because they are released frequently, have small revisions, and can be published earlier. Initial jobless claims are released every Thursday, and unemployment rate data will be released next week.

In the study, Goldman Sachs used a daily dataset containing the latest data from 45 economic indicators to assess the real-time accuracy of their ability to predict economic slowdowns. The results show that business surveys and labor market data provide the most timely information at economic turning points.

In past economic recessions with clear catalysts—such as the 1973 oil shock, the Volcker rate hikes of 1979-1980, the spike in oil prices due to the 1990 Kuwait invasion, and the 2001 internet bubble burst—hard economic data (such as real GDP) typically takes about four months to show clear signs of weakening in real-time data, while the expectations component of business surveys usually begins to decline about a month after the shock occurs.

Survey data has raised alarms, but should the market believe it?

Goldman Sachs points out that the expectations component of business surveys has significantly declined, with some even dropping to their lowest levels outside of recession periods. However, given that soft data has been sending pessimistic signals over the past few years without accurately predicting economic performance, an important question arises: Should the market trust the signals from survey data now?

The research team believes that current survey data may be more reliable than in the past, for two reasons:

First, the recent deterioration is primarily driven by more respondents expecting actual activity to decline, rather than just an increase in respondents expecting activity to remain unchanged;

Second, some bias factors affecting business surveys in the post-pandemic period (such as the normalization of the pace of reopening from the pandemic, unprecedented supply chain disruptions, and the transition from goods to services) are now less significant.

The report states:

Our analysis warns against ignoring the current deterioration in survey data, even though these indicators have been overly pessimistic in recent years. The pattern of data deterioration in recent weeks is similar to previous "event-driven" growth slowdowns.

Consumer spending will slow due to tariff impacts, and capital spending will face the biggest hit in the second half of the year

Goldman Sachs expects that higher tariffs will push up consumer prices, thereby depressing real disposable income and consumer spending. The research team found that the transmission of tariffs to inflation was most significant between March-July 2018 and January-April 2019, following the trade war.

The report notes that the inflation effect typically becomes apparent within two to three months after the implementation of tariffs, and consumer spending is expected to slow shortly after price increases. Historically, core retail sales have been the best hard indicator of consumer spending during economic slowdowns, providing more timely real-time signals than monthly consumer spending and disposable income dataResearch further indicates that tightening financial conditions and rising policy uncertainty will negatively impact capital expenditures this year. According to Goldman Sachs' capital expenditure pulse model estimates, capital expenditure growth in the second half of 2025 will be dragged down by as much as 5.5 percentage points.

In past economic slowdowns dominated by capital expenditures, hard data available in real-time (such as capital goods orders) typically takes about five months to weaken and is noisier than soft data, which usually begins to deteriorate about a month after the slowdown starts.

Overall, Goldman Sachs expects survey data (soft data) to continue to soften, while hard data will not begin to weaken until mid to late summer, at which point higher prices, weaker spending, and slower hiring may start to show up in official statistics.

Goldman Sachs warns not to overlook the current deterioration in survey data, even though these indicators have been overly pessimistic in recent years.

As of now, the pattern of recent data deterioration is similar to previous "event-driven" economic slowdowns, but it is still too early to draw strong conclusions from the currently limited data