8 May 2022 | 8:14PM EDT

US Economics Analyst

The Risks to the Inflation Path and the Implications for the
Fed (Walker)
n At last week’s FOMC meeting, Chair Powell signaled that 50bp rate hikes are Jan Hatzius
+1(212)902-0394 | jan.hatzius@gs.com
likely at the June and July meetings, but the pace of tightening in September Goldman Sachs & Co. LLC

and beyond will depend on the data, especially the sequential pace of inflation. Alec Phillips
+1(202)637-3746 | alec.phillips@gs.com
Goldman Sachs & Co. LLC
n Core PCE inflation has run at a 3½% annualized pace over the last two months, a
David Mericle
substantial deceleration from the 6% pace over the prior four months. We +1(212)357-2619 |
david.mericle@gs.com
expect the annualized pace to reaccelerate to 4¼% on average in Q2 before Goldman Sachs & Co. LLC

falling back to 3½% in Q3 and 3¼% in Q4. Spencer Hill, CFA

+1(212)357-7621 | spencer.hill@gs.com
Goldman Sachs & Co. LLC
n There are three pillars of our 2022 inflation forecast. First, we expect inflation in
supply-constrained durable goods categories to fall sharply to roughly zero on Joseph Briggs
+1(212)902-2163 |
joseph.briggs@gs.com
net. This accounts for the entirety of the decline in our 2022 forecast, even Goldman Sachs & Co. LLC
though we are not assuming payback for recent price spikes in these categories Ronnie Walker
+1(917)343-4543 |
on net until after this year. Second, we think shelter inflation has peaked on a ronnie.walker@gs.com
Goldman Sachs & Co. LLC
sequential basis but will rise above 5% on a year-on-year basis. Third, we expect
Manuel Abecasis
inflation in the rest of the service sector to remain steady at just over 4% +1(212)902-8357 |
manuel.abecasis@gs.com
because labor market overheating is likely to keep wage pressures firm for a Goldman Sachs & Co. LLC

while.
n We think this inflation path coupled with the convincing growth deceleration we
expect this year would probably make the FOMC comfortable reverting to a
25bp/meeting hiking pace starting at the September meeting. But the inflation
outlook is highly uncertain, and we therefore also consider a range of other
scenarios based on alternative assumptions about supply-side problems,
commodity prices, and wage growth.
n Our scenario analysis suggests that a wide range of inflation outcomes is
plausible. In particular, differing assumptions on supply constraints have a large
impact. If prices in supply-constrained categories begin to revert partially to trend
and wage growth slows more materially than we expect, the sequential pace of
inflation could be 1pp lower over the rest of this year. Under that scenario,
annualized sequential inflation would read 3.0% at the September FOMC
meeting and increase our conviction that the FOMC will revert to a 25bp hike.
n Alternatively, if prices in supply-constrained categories rebound to pandemic
highs and wage growth is stronger than expected, the pace of core PCE inflation
could be ¾pp higher. Under that scenario, inflation would read 4.6% at the
September meeting, increasing the likelihood that the FOMC continues hiking in

Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html.
Goldman Sachs US Economics Analyst

50bp increments beyond July.

8 May 2022 2
Goldman Sachs US Economics Analyst

The Risks to the Inflation Path and the Implications for the Fed

At this past week’s FOMC meeting, Chair Powell signaled that the FOMC is likely to
raise the policy rate by 50bp at its June and July meetings. Powell suggested that the
Committee would “just go back to 25 basis point increases” in subsequent meetings if
“economic and financial conditions evolve broadly in line with expectations,” stipulating
that the Committee will want to have seen evidence that inflation “is under control and
starting to come down.”

In this week’s Analyst, we first outline the three pillars of our baseline inflation forecast.
We then test how different assumptions about key parameters would impact the path of
inflation and consider the potential implications for monetary policy.

Pillar 1: Supply-Constrained Categories Drive the Deceleration

The sequential pace of core PCE inflation has decelerated sharply in the last two
readings (3.5% month-over-month annualized in February and March vs. 6.0%
annualized over the prior four months). The deceleration partly reflected substantial
declines in some of durable goods categories that saw unusually large price increases
because of supply constraints last year, in particular used cars and consumer
electronics.

While we expect used car prices to fall further in the April report, renewed supply-side
deterioration will likely limit further payback from elevated goods prices this year. The
Russian invasion of Ukraine has caused commodity prices to surge, pushing up our
estimate of the impact of commodity price changes on quarter-on-quarter annualized
core PCE inflation from +60bp/+45bp/+20bp in Q2-Q4 before the invasion to
+90bp/+75bp/+45bp today (Exhibit 1, left). Additionally, renewed virus-related
restrictions in China and ongoing domestic supply chain bottlenecks will likely keep
manufactured goods in short supply, though they do not appear to be substantially
reversing the progress made in Q1.

As a result, we expect inflation in supply-constrained durable goods categories to fall

sharply to roughly zero on net. This accounts for the entirety of the decline in our 2022
forecast, even though we are not assuming payback for recent price spikes in these
categories on net until after this year.

8 May 2022 3
Goldman Sachs US Economics Analyst

Exhibit 1: Commodity Prices Have Risen Significantly Since the Russian Invasion of Ukraine, Boosting Headline and Core Inflation; Supplier
Delivery Times Have Worsened
Percentage points Percentage points Days Days
1.25 Estimated Impact of Commodity Prices 1.25 110 Average Commitment Leadtime for Production Materials, 110
on QoQ Annualized Core PCE Inflation ISM Manufacturing Index
Lumber
1.00 1.00 100 100
Agriculture / Livestock
Precious Metal
Industrial Metal 90 90
0.75 0.75
Energy
80 80
0.50 0.50
70 70
0.25 0.25
60 60

0.00 0.00
50 50

-0.25 Total, Assuming Unchanged Prices -0.25 40 40

Total, Assuming Unchanged Prices
As of Feb. 25
-0.50 -0.50 30 30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1990 1994 1998 2002 2006 2010 2014 2018 2022
2020 2021 2022

Source: Institute for Supply Management, Goldman Sachs Global Investment Research

Pillar 2: Shelter Inflation Will Remain Firm

Shelter inflation is likely to remain firm amidst the tightest housing market in decades,
as the sequential pace of asking rent growth in alternative data—which leads the official
shelter inflation measure—has slowed substantially since 2021Q3 but is still running at
roughly twice the pre-pandemic rate (Exhibit 2, left).

While slower home price appreciation usually leads to slower shelter inflation in
isolation, the higher mortgage rates that are likely to slow home price appreciation have
also raised the cost of financing a new mortgage—the more relevant measure when
deciding between buying and renting—by roughly 50% over the last year (Exhibit 2,
right). When added to our city-level model, changes in mortgage rates are positively
associated with shelter inflation, suggesting that the drag from slower home price
growth we expect will be at least partly offset by higher rental demand due to
decreased new home affordability.

When estimating the path ahead, we also take into consideration our recent finding that
the subtraction of higher utility costs from owners’ equivalent rent has caused the
recent sequential pace to understate the underlying trend by several tenths of a
percentage point on a month-over-month annualized basis.

Taken altogether, we forecast a strong pace of monthly housing inflation in Q2 followed

by a slowdown in the second half of the year as upward pressure on new rents
dissipates, with a monthly average pace of 0.44% and 0.39% in those periods,
respectively (or 5.4% and 4.8% annualized).

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Goldman Sachs US Economics Analyst

Exhibit 2: Asking Rent Growth Has Slowed but Remains Elevated; The Increase in the Cost of a New Mortgage From Higher Rates Will Keep
Upward Pressure on Rents Despite Slowing Home Price Growth
Percent change, annual rate Percent change, annual rate Percent Monthly Payment for New Mortgages Percent
40 Asking Rent Measures 40 35 as a Share of Median Household Income 35
Zillow Actual
35 35 33 33
Apartment List
GS Projection
30 REIS 30
Costar 31 31
25 Census 25
Average 29 29
20 20
27 27
15 15
25 25
10 10
23 23
5 5
21 21
0 0
19 19
-5 -5
17 17
-10 -10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
15 15
2019 2020 2021 2022 1996 2000 2004 2008 2012 2016 2020

Source: Zillow, Apartment List, REIS, Costar, Department of Commerce, Goldman Sachs Global Investment Research

Pillar 3: A Tight Labor Market Will Keep Wage Growth and Services Inflation Elevated
The left panel of Exhibit 3 shows that our GS composition-adjusted wage tracker
decelerated to 5.4% (quarter-on-quarter annualized) in Q1, but remained well above
levels compatible with the Fed’s 2% inflation target. To extract a cleaner signal of the
recent trend, we construct a trimmed-mean version of average hourly earnings using
the granular industry-level wages that are released one month after the initial
employment report (Exhibit 3, right). Our trimmed-mean measure declined to a 4½%
three-month annualized pace in March, though its underperformance relative to our
wage tracker could reflect mean reversion following outsized readings in 2021.

We expect wage growth to moderate but remain fairly hot this year due to the tightness
of the labor market, reflected in the widest gap between available jobs and workers in
postwar US history (Exhibit 3, right). This should contribute to continued firm inflation in
the core services categories of PCE outside of housing, such as food services.1

1
Higher food commodity prices and a decline in the number of companies providing their employees with
free meals should apply additional upward pressure to food services inflation. If the food furnished to
employees price index, a subcomponent of PCE food services, reverted to its pre-pandemic trend, it could
boost year-end core PCE inflation by roughly 0.1pp.

8 May 2022 5
Goldman Sachs US Economics Analyst

Exhibit 3: The Sequential Pace of Wage Growth Has Slowed Moderately; Trimming the Outliers From Monthly Average Hourly Earnings
Prints Reveals a More Stable Trend
Percent change, annual rate Percent change, annual rate Percent change, annual rate Percent change, annual rate
8 8 12 Average Hourly Earnings, MoM 12
Wage Growth
+65%
Actual Trimmed*
7 7
9 9

6 6

6 6
5 5

4 4 3 3

3 3
0 0

2 2
GS Composition-Adjusted Wage Tracker, QoQ
-13%
Trimmed AHE, MoM, 3m avg.* -3 -3
1 1 2006 2008 2010 2012 2014 2016 2018
Jan Jul Jan Jul Jan Jul Jan *Trims top- and bottom-10% of detailed industry-weighted wage growth observations, then
2019 2020 2021 2022 is rescaled to overall average hourly earnings.

Source: Department of Labor, Goldman Sachs Global Investment Research

The Upcoming Monthly Inflation Path…

Our base case is that inflation will reaccelerate from the 3½% annualized pace of the
past two months to 4¼% on average in Q2, before falling back to 3½% in Q3 and 3¼%
in Q4. The left panel of Exhibit 4 shows the contributions to month-on-month (not
annualized) core PCE inflation by category under our forecasts. As described earlier,
declining used car prices weighed on the February and March prints, but the slowdown
also reflected softer financial, health care, and food services inflation—all three of which
are included in the red bars for “Other Services” in Exhibit 4. We expect financial
services inflation—which saw outright declines in February and March—to increase
steadily over the rest of this year as intermediation spreads rise with higher interest
rates. Health care and food services inflation are also likely to reaccelerate over the next
few months in response to continued wage pressures and higher agricultural
commodity prices, before moderating in the back half of the year as wage growth slows
modestly.

The right panel of Exhibit 4 shows the contributions to year-on-year core PCE inflation.
The lapping of last year’s large durable goods price increases means that the
contribution to inflation from supply-constrained categories will shrink rapidly even in the
absence of goods price deflation on a sequential basis and contribute to substantially
lower core PCE inflation at year-end (we estimate 3.9% on a year-on-year basis). The
appendix provides a full account of our year-over-year component-level forecasts.

8 May 2022 6
Goldman Sachs US Economics Analyst

Exhibit 4: Strong Services Inflation Will Keep the Sequential Pace of Core PCE Elevated Through Year-End; Year-Over-Year Core Inflation
Will Decline Further in Coming Months as Last Year’s Sharp Goods Price Increases Drop Out
Percentage points Percentage points Percentage points Percentage points
Contributions to Month-on-Month Core PCE Inflation 6 Contributions to Year-on-Year Core PCE Inflation 6
0.6 0.6 Other Goods GS Forecast
GS Forecast
5 5
Travel
Supply-Constrained*
0.4 0.4 4 4
Other Services
Shelter
3 Core PCE 3
0.2 0.2

2 2
0.0 0.0
1 1
Other Goods
-0.2 Travel -0.2
Supply-Constrained* 0 0
Other Services
Shelter
-0.4 Core PCE -0.4 -1 -1
Sep-20

Sep-21

Sep-22

Sep-21

Sep-22
Jul-20

Jul-21

Jul-22

Jul-20
Sep-20
May-20

Nov-20
Jan-21

May-21

Nov-21

May-22

Nov-22

May-20

Nov-20
Jan-21

Jul-21

Jul-22
May-21

Nov-21

May-22

Nov-22
Jan-20

Jan-22

Jan-20

Jan-22
Mar-20

Mar-21

Mar-22

Mar-20

Mar-21

Mar-22
* New, used, and rental cars, furniture, sporting equipment, household appliances, sports and recreational vehicles, and video, audio, photo, and info. equipment.

Source: Department of Commerce, Goldman Sachs Global Investment Research

…And Its Risks

While the pace of inflation will be a key determinant of the FOMC’s policy decisions in
future meetings, it would be overly precise to specify an exact level of inflation that will
result in a 25bp or 50bp hike. The composition of recent inflation, the growth outlook,
and the extent to which financial conditions have already tightened will all influence the
pace of rate hikes in September and beyond too. Under our baseline economic outlook
and inflation forecast, we think the FOMC would be comfortable reverting to a
25bp/meeting hiking pace starting at the September meeting, when we expect core
PCE inflation will be running at a 4% annualized pace (July print, Exhibit 5), though we
think the decision is a close call.

8 May 2022 7
Goldman Sachs US Economics Analyst

Exhibit 5: We Expect That Core PCE Inflation Will Be Running at a 4% Annualized Pace at the July FOMC
Meeting, Making the Decisions Between a 25bp and 50bp Hike a Close Call

Percent change, annual rate Percent change, annual rate

7 Core PCE Inflation, MoM Annualized 7
Actual GS Forecast
6 6
Most recent print at the __ FOMC meeting
5 5
June July
Sept.
4 4
Jan.
Nov. Dec.
3 3

2 2

1 1

0 0
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
2021 2022

Source: Department of Commerce, Goldman Sachs Global Investment Research

Inflation is notoriously difficult to predict even at short horizons, as recent experience

has emphasized, so we next construct upside and downside scenarios based on
alternative assumptions about supply constraints, commodity prices, and wage growth
(all of which are detailed in the footnote of Exhibit 6).

Our scenario analysis suggests that a wide range of inflation outcomes is plausible.
Differing assumptions on supply constraints—the path for which are especially uncertain
in light of lockdowns in China and the war in Ukraine—can have a particularly large
impact, and combining scenarios expands the plausible range of outcomes even further.
For example, if prices in supply-constrained categories close one-third of their deviation
from their pre-pandemic trend and wage growth is 1pp softer we expect, the sequential
pace of inflation over the rest of this year would be roughly 1pp lower. Under that
scenario, annualized sequential inflation would read 3.0% (or 3.3% on a 3m annualized
basis) at the September FOMC, which would increase our conviction that the FOMC will
revert to 25bp hikes at that meeting.

Alternatively, if prices of supply-constrained goods were to revert to their pandemic

highs—reversing the progress toward normalization that has been made so far—and
wage growth is 1pp stronger than we expect, it could add ¾pp or more to our baseline
forecast. Under that scenario, inflation would run at a 4.6% sequential annualized rate
(or 4.8% on a 3m annualized basis) at the September meeting, increasing the likelihood
that the FOMC continues hiking in 50bp increments in September and beyond.

8 May 2022 8
Goldman Sachs US Economics Analyst

Exhibit 6: Additional Easing of Supply Constraints Could Pull the Sequential Pace of Core PCE Inflation to
Just Moderately Above 2% in the Fourth Quarter, While Supply Constraints Returning to the Pandemic
Highs Over the Rest of This Year Could Boost It ½pp
Percent change, annual rate Percent change, annual rate
5.5 Monthly Annualized Core PCE Inflation 5.5
GS Baseline
5.0 Range under upside and 5.0
downside scenarios* for:
4.5 Supply Constraints 4.5
Commodity Prices
4.0 Wage Growth 4.0

3.5 3.5

3.0 3.0

2.5 2.5

2.0 2.0
Apr. May June July Aug. Sept. Oct. Nov. Dec.

Scenarios*
Supply constraints
Upside: Prices of supply-constrained goods revert to pandemic-era highs over nine months.
Downside: One-third of the gap vs. pre-pandemic price trends for constrained goods closes over nine months.
Commodity prices
Upside: Oil prices rise to $140/bl, other prices grow in line with our strategists' bullish forecasts.
Downside: Commodity prices retrace to the Feb. 25th level.
Wage growth
Upside: Wage growth accelerates to 6%, the top end of the recent range.
Downside: Wage growth decelerates to 4%, just below the most recent AHE print.

Source: Goldman Sachs Global Investment Research

Ronnie Walker

8 May 2022 9
Goldman Sachs US Economics Analyst

Appendix: We Expect That a Shrinking Contribution From Goods Inflation Will Slow Core PCE Inflation to 3.9% By Year-End
GS Forecasts
Mar. 2022 End 2022 End 2023 End 2024
Contribution Contribution Contribution
Weight YoY YoY to Change YoY to Change YoY to Change

Core PCE 100.0 5.18 3.9 -1.3 2.4 -2.7 2.3 -2.9

Core Goods 27.4 7.5 2.2 -1.5 -2.0 -2.3 -1.0 -2.1
New Vehicles 2.5 13.1 3.0 -0.3 -1.6 -0.3 -0.1 -0.3
Used Vehicles 1.5 33.5 -10.7 -0.7 -16.8 -0.6 -7.7 -0.5
Household Appliances 0.5 11.8 3.5 0.0 -4.4 -0.1 -4.9 -0.1
Video, Audio, Computers 2.3 -1.1 -6.0 -0.1 -6.9 -0.1 -8.0 -0.1
Recreational Vehicles 0.8 6.7 4.3 0.0 1.9 0.0 0.6 0.0
Jewelry, Watches 0.9 2.4 -0.2 0.0 -0.1 0.0 -0.2 0.0
Clothing & Footwear 3.3 6.7 3.8 -0.1 0.4 -0.2 0.0 -0.2
Pharma & Medical 4.2 2.7 3.1 0.0 -1.5 -0.2 1.4 -0.1
Pets Products 0.6 6.9 8.1 0.0 2.7 0.0 1.2 0.0
Expenditures Abroad 0.1 0.1 3.7 0.0 4.0 0.0 3.2 0.0
Residual Core Goods 10.7 6.5 4.5 -0.2 -0.5 -0.7 -0.3 -0.6

Core Services 72.6 4.3 4.4 0.1 3.9 -0.3 3.4 -0.7
Housing 16.9 4.5 5.2 0.1 4.4 0.0 3.8 -0.1
Ground Transportation 0.3 1.4 4.0 0.0 2.8 0.0 2.9 0.0
Air Transportation 0.8 25.0 11.0 -0.1 2.8 -0.2 3.3 -0.2
Food Services & Accommodation 7.9 7.8 5.7 -0.2 4.0 -0.3 3.8 -0.3
Financial Services & Insurance 9.0 1.3 3.7 0.2 4.1 0.3 3.4 0.2
Medical Services 18.1 2.0 2.5 0.1 3.6 0.3 2.9 0.2
Foreign Travel 0.9 9.7 10.8 0.0 2.0 -0.1 2.4 -0.1
Residual Core Services 18.6 5.9 4.8 -0.2 3.8 -0.4 3.4 -0.5

Source: Department of Commerce, Goldman Sachs Global Investment Research

8 May 2022 10
Goldman Sachs US Economics Analyst

The US Economic and Financial Outlook

THE US ECONOMIC AND FINANCIAL OUTLOOK
(% change on previous period, annualized, except where noted)
2020 2021 2022 2023 2024 2025 2022 2023
(f) (f) (f) (f) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

OUTPUT AND SPENDING

Real GDP -3.4 5.7 2.6 2.2 1.9 1.9 -1.4 2.9 2.5 2.3 2.0 2.0 2.0 2.0
Real GDP (annual=Q4/Q4, quarterly=yoy) -2.3 5.5 1.5 2.0 1.9 1.9 3.6 2.6 2.7 1.5 2.4 2.2 2.1 2.0
Consumer Expenditures -3.8 7.9 3.0 2.1 1.9 1.9 2.7 2.3 2.5 2.3 2.0 2.0 2.0 2.0
Residential Fixed Investment 6.8 9.2 -1.5 1.1 2.0 2.0 2.1 -1.4 -3.0 1.0 2.5 2.3 2.0 2.0
Business Fixed Investment -5.3 7.4 4.9 3.4 3.5 3.6 9.2 3.0 4.0 3.4 3.4 3.4 3.4 3.4
Structures -12.5 -8.0 -4.1 0.8 2.6 3.0 -0.9 -7.8 -1.0 1.0 2.0 2.0 2.0 2.0
Equipment -8.3 13.1 6.0 2.7 2.8 3.0 15.4 4.0 3.0 3.0 2.5 2.5 2.5 2.5
Intellectual Property Products 2.8 10.0 8.2 5.5 4.7 4.5 8.1 7.5 7.5 5.0 5.0 5.0 5.0 5.0
Federal Government 5.0 0.6 -4.4 -1.6 -0.1 0.0 -5.9 -3.0 -3.0 -3.0 -1.0 -1.0 0.0 0.0
State & Local Government 0.9 0.4 0.5 1.0 1.0 1.0 -0.8 0.9 1.0 1.0 1.0 1.0 1.0 1.0
Net Exports ($bn, '12) -943 -1,284 -1,462 -1,388 -1,372 -1,394 -1,542 -1,459 -1,438 -1,409 -1,408 -1,395 -1,381 -1,367
Inventory Investment ($bn, '12) -42 -33 145 95 60 60 159 145 150 125 125 100 85 70
Industrial Production, Mfg. -6.6 6.2 3.6 1.4 1.7 1.6 5.4 1.5 1.3 1.1 1.5 1.5 1.7 1.8

HOUSING MARKET
Housing Starts (units, thous) 1,397 1,605 1,699 1,720 -- -- 1,753 1,687 1,658 1,699 1,719 1,765 1,703 1,692
New Home Sales (units, thous) 828 774 811 889 887 887 814 786 806 838 861 903 901 891
Existing Home Sales (units, thous) 5,638 6,127 5,843 5,783 5,851 5,918 6,063 5,797 5,769 5,741 5,758 5,775 5,792 5,809
Case-Shiller Home Prices (%yoy)* 9.5 18.8 9.0 2.7 3.5 3.8 12.5 11.3 10.1 9.0 -- -- -- --

INFLATION (% ch, yr/yr)

Consumer Price Index (CPI)** 1.3 7.1 6.2 2.8 2.6 2.4 8.0 8.2 7.9 6.7 5.1 3.6 2.9 2.8
Core CPI ** 1.6 5.5 4.4 2.6 2.6 2.5 6.3 5.5 5.3 4.7 3.8 3.3 2.8 2.7
Core PCE** † 1.5 4.9 3.9 2.4 2.3 2.2 5.2 4.7 4.5 4.1 3.5 3.1 2.7 2.5

LABOR MARKET
Unemployment Rate (%)^ 6.7 3.9 3.3 3.3 3.3 3.3 3.6 3.4 3.3 3.3 3.3 3.3 3.3 3.3
U6 Underemployment Rate (%)^ 11.7 7.3 6.5 6.3 6.2 6.1 6.9 6.6 6.4 6.5 6.4 6.4 6.3 6.3
Payrolls (thous, monthly rate) -774 562 303 99 86 60 549 352 180 130 107 98 95 95
Employment-Population Ratio (%)^ 57.4 59.5 60.5 60.4 60.3 60.2 60.1 60.3 60.4 60.5 60.5 60.5 60.4 60.4
Labor Force Participation Rate (%)^ 61.5 61.9 62.6 62.5 62.4 62.2 62.4 62.4 62.5 62.6 62.5 62.5 62.5 62.5
Average Hourly Earnings (%yoy) 4.9 4.2 5.2 4.6 4.1 3.9 5.4 5.3 5.1 4.9 4.7 4.8 4.6 4.4

GOVERNMENT FINANCE
Federal Budget (FY, $bn) -3,129 -2,772 -1,100 -1,050 -1,150 -1,300 -- -- -- -- -- -- -- --

FINANCIAL INDICATORS
FF Target Range (Bottom-Top, %)^ 0-0.25 0-0.25 2.5-2.75 3-3.25 3-3.25 3-3.25 0.25-0.5 1.25-1.5 2-2.25 2.5-2.75 2.75-3 3-3.25 3-3.25 3-3.25
10-Year Treasury Note^ 0.93 1.52 2.70 2.80 2.70 2.65 2.32 2.50 2.60 2.70 2.75 2.80 2.80 2.80
Euro (€/$)^ 1.22 1.13 1.11 1.20 1.25 1.25 1.11 1.05 1.07 1.11 1.13 1.15 1.18 1.20
Yen ($/¥)^ 103 115 126 115 107 107 121 129 127 126 123 120 118 115
* Weighted average of metro-level HPIs for 381 metro cities where the weights are dollar values of housing stock reported in the American Community Survey. Annual numbers are Q4/Q4.
** Annual inflation numbers are December year-on-year values. Quarterly values are Q4/Q4.
† PCE = Personal consumption expenditures. ^ Denotes end of period.
Note: Published figures in bold.

Source: Goldman Sachs Global Investment Research

8 May 2022 11
Goldman Sachs US Economics Analyst

Economic Releases
Time Estimate
Date (ET) Indicator GS Consensus Last Report

Mon May 09 10:00 Wholesale Inventories (March final) n.a. +2.3% +2.3%
Tue May 10 10:00 NFIB Small Business Optimism (April) n.a. 92.9 93.2
Wed May 11 8:30 Consumer Price Index (April) +0.15% +0.2% +1.2%
Ex Food and Energy (April) +0.42% +0.4% +0.3%
Thu May 12 8:30 Producer Price Index, Final Demand (April) +0.6% +0.5% +1.4%
Ex Food and Energy (April) +0.7% +0.6% +1.0%
Ex Food, Energy, and Trade (April) +0.7% +0.6% +0.9%
8:30 Initial Jobless Claims 195k 190k 200k
Continuing Claims n.a. 1,360k 1,384k
Fri May 13 8:30 Import Price Index (April) n.a. +0.6% +2.6%
10:00 UMich Consumer Sentiment (May preliminary) 63.0 64.0 65.2

Source: Goldman Sachs Global Investment Research

8 May 2022 12