Goldman Sachs has revised down its economic growth forecast for 2021 and 2022 as the economy recovers more slowly than previously anticipated.
The financial services giant, which has a research team devoted to tracking economic trends and predictions, cut its gross domestic product projection for 2021 slightly from 5.7% to 5.6%. The Goldman Sachs economists had already pared that number down from 6.2% in September.
The researchers took an even heavier hand in slashing medium-term growth forecasts. The firm now expects GDP to grow at a 4% rate next year, down from its previous forecast of 4.4%. This year’s quarter four projection was also revised to 4.5% from 5%.
Despite the declines, the economists said that the changes are mostly offset by upgrades in the longer-run 2023 and 2024 projections.
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The forecasters blamed the downgrades for medium-term growth on slowing government spending and the need for service spending to recover quickly enough to offset a decline in goods spending, which has been elevated but is now normalizing.
“After updating our estimates of the key growth impulses that drive our consumption forecast—reopening, fiscal stimulus, pent-up savings, and wealth effects—and incorporating a longer-lasting virus drag on virus-sensitive consumer services spending, we now expect a more delayed recovery in consumer spending,” the economists said.
They also said they don’t think shortages of semiconductor chips will abate until the first half of next year and that inventory stocking will be delayed until next year. The economists said that those factors combine for “a less front-loaded recovery from here than we had expected.”
Goldman Sachs left its unemployment projections unchanged, with the unemployment rate falling to 4.2% by the end of the year and tumbling to its pre-pandemic level of 3.5% by the end of next year.
The delta variant of COVID-19 has also applied downward pressure on U.S. economic growth. Many growth forecasts were slashed over the summer as the strain took hold, catapulting from about 10,000 new cases per day in early July to more than 150,000 per day in early September. The surge caused fresh pandemic restrictions and delayed returns to in-office work across the country.
The number of new infections, deaths, and hospitalizations has fallen since mid-September and is now below 100,000 new cases per day.
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The most recent jobs report was disappointing. The economy added just 194,000 new jobs in September as the delta variant held back commerce — far below economists’ forecasts of 473,000 new jobs. The unemployment rate now sits at 4.8%, well above what it was prior to the health crisis.
