Goldman Sachs cuts US growth forecast as consumer sees 'harder path'

[WASHINGTON] Goldman Sachs Group Inc. economists revised down their forecast for growth in the US economy this year, pointing to a "harder path" ahead for the American consumer than previously anticipated.

Overall expansion in 2021 is now seen at 5.7 per cent, economist Ronnie Walker wrote in a report to clients on Monday. That compares with an expectation of 6 per cent published at the end of August.

Mr Walker said the weaker growth will follow through into more of a pickup in 2022. Goldman raised its forecast for that year to 4.6 per cent, up from 4.5 per cent previously.

Explaining the downgrade for 2021, Mr Walker wrote that American consumers are likely to spend less amid the Delta variant's emergence, fading fiscal support and a switch from demand for goods to services.

He added that supply-chain disruptions had hit inventory restocking too. "The hurdle for strong consumption growth going forward appears much higher: the Delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service- sector recovery will both be headwinds in the medium term," said Mr Walker.

The bank also lifted its projection for the unemployment rate to 4.2 per cent at end of 2021 from a prior estimate of 4.1 per cent.

BLOOMBERG