U.S. growth forecast has been slashed to 5.7%, as Goldman Sachs revised its predictions on the economic recovery for the U.S. in 2021. The investment bank considers that American consumers will spend less amid an increase in COVID-19 infections due to the Delta variant.
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U.S. Growth Forecast
According to Bloomberg, economist Ronnie Walker wrote in a report to clients on Monday that the overall U.S. economic expansion this year is now estimated to reach 5.7%, down from the 6% forecast at the end of August.
The Goldman Sachs expert said: “The obstacle to strong consumption growth going forward looks much greater: The Delta variant is already weighing on third-quarter growth, and weakening fiscal stimulus and a slower recovery in the services sector will be headwinds in the future.”
Walker asserts that American consumers will face a “harder road” than previously anticipated.
The bank also increased its unemployment rate projections to 4.2% by the end of this year from a previous estimation of 4.1%, according to Bloomberg.
The updated forecast arrives after the U.S. Department of Labor reported last week that employers added fewer than 235,000 expected jobs in August. The unemployment rate dropped to 5.2%, signaling a marked slowdown in job growth amid the increased spread of the Delta variant.
Another Slash
According to USA Today, daily coronavirus infections have skyrocketed by 316% since last year’s Labor Day, while hospitalizations have also soared 158% during the same time in 2020.
The high number of hospitalizations is causing numerous states to fall short in the number of ICU beds available to patients, the report says.
In mid-August, Goldman Sachs had readjusted its U.S. growth forecast for the third quarter from 9% to 5.5%, while also raised estimates for Q4 and beyond.
Back then, Reuters reported: “The investment bank said the Delta variant was having a somewhat larger-than-expected effect on growth and inflation due to its hit to consumer spending and production.”
Goldman economists said: “Spending on dining, travel, and some other services is likely to decline in August, though we expect the drop to be modest and brief.”
Further, the bank had adjusted its U.S. growth forecast for Q4 from 5.5% to 6.5%, in a scenario in which the fear for the virus would tail off, the services sector recovery would resume, and retail stock would bounce back up.
