Goldman Sachs cuts US growth forecast amid Delta variant spread

Overall expansion in 2021 is now seen at 5.7 per cent.
Overall expansion in 2021 is now seen at 5.7 per cent.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - Goldman Sachs Group economists revised down their forecast for growth in the United States economy this year, pointing to a "harder path" ahead for the American consumer than previously anticipated.

Overall expansion this year is now seen at 5.7 per cent, economist Ronnie Walker wrote in a report to clients on Monday (Sept 6). That compares with an expectation of 6 per cent published at the end of last month.

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

Explaining the downgrade for this year, Mr Walker wrote that American consumers are likely to spend less amid the emergence of the Delta variant of the coronavirus, 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 third-quarter 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 the year from a prior estimate of 4.1 per cent.