Coronavirus vaccine to fuel faster economic recovery: Goldman Sachs

A “resilient” consumer and an imminent COVID-19 vaccine will propel the U.S. economy to faster growth than previously expected in 2021, according to Goldman Sachs Group.

Economists at the New York-based investment bank on Monday raised their 2021 U.S. gross domestic product forecast to 5.3% from 5%. The U.S. economy has not posted annual growth that strong since 1984 when it grew at a 7.24% pace.

The firm sees gross domestic product growing at a 3% pace during the first three months of the year, up from its previous 1% estimate, before topping out at 8.5% in the second quarter. Growth will then slow to 5% and 4% during the final two quarters of the year.

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“The growth outlook remains very uncertain, with rising new virus cases and fatalities, warnings of further state and local restrictions to come, and signs of an increasing drag on virus-sensitive industries, but overall a very resilient consumer in the midst of the virus resurgence,” wrote a Goldman Sachs research team led by chief economist Jan Hatzius.

The U.S. on Friday reported a daily record of more than 229,000 COVID-19 infections, but consumer spending on services has so far remained resilient with a vaccine on the horizon.

The U.S. Food and Drug Administration will on Thursday consider emergency use authorization for the Pfizer/BioNTech vaccine and a week later examine Moderna’s.

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Approval could be issued within days of the hearings, with distribution beginning immediately thereafter under Operation Warp Speed, the program adopted by President Trump to produce and deliver 300 million doses of a safe and effective COVID-19 vaccine.

A vaccine will give the U.S. economy a “significant boost” from the first quarter onward, according to Goldman. Pent-up demand causing consumers to spend half of the excess savings built up during the pandemic would lift consumption by 0.5%, on average, during each quarter after the vaccine’s arrival.

A COVID-19 relief package would also provide a lift to the economy, according to Goldman. The firm says a package arriving late in the first quarter could add up to 1.5 percentage points to economic growth.

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A bipartisan $908 billion package is currently being considered. The proposal has been backed by House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, both Democrats, as a basis for negotiations. Senate Majority Leader Mitch McConnell, a Republican, has supported a $500 billion package.