Goldman Sachs cuts US growth forecast amid delta variant concerns
Firm lowered growth forecast to 5.7% from 6%
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Goldman Sachs Group Inc. economists lowered their forecast for U.S. economic growth this year due to concerns the COVID-19 delta variant could impact consumer spending.
The updated forecast from economist Ronnie Walker anticipates the economy will grow at 5.7% this year, down from the previous estimate of 6%. The drop comes as the firm cut its fourth-quarter forecast to 5.5% from 6.5%.
The revision was the second made this month by the firm’s economist, who on Aug. 18 lowered its third-quarter outlook to 5.5% from 9%.
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"Although we expect the Delta setback to be brief, two longer-standing concerns pose challenges for consumption growth over the next few quarters," Walker wrote.
The economists see the drop in fiscal stimulus, which peaked during the second quarter, weighing on spending as it continues to fade through the end of next year.
In addition, an elevated level of spending on goods will return to normal levels, but spending on services will be slow to recover in still-depressed categories, like office-adjacent services.
Goldman revised next year’s growth forecast up to 4.6% from 4.5%.
Goldman Sachs isn’t the only Wall Street bank to tweak its economic outlook in recent days.
Last week, Morgan Stanley’s Ellen Zentner slashed her third-quarter GDP forecast to 2.9% from 6.5% amid concerns the delta variant caused a slowdown in August.
She held her fourth-quarter GDP forecast at 6.7%.
The U.S. economy has shown signs of slowing down in recent weeks.
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The August jobs report released on Friday showed hiring slowed sharply last month. Nonfarm payrolls added 235,000 workers in August, well shy of the 728,000 new jobs that economists surveyed by Reinfitiv were expecting.
Other releases have shown a sharp drop in consumer confidence over coronavirus and inflation worries and a slowdown in housing.