Goldman Sachs cut its U.S. economic growth target to 5.6%

The latest news shows that Goldman Sachs lowered its U.S. economic growth target to 5.6% for 2021. Furthermore, it cut its economic forecast to 4% for 2022. The bank cited an expected drop in fiscal support through the end of next year and a more delayed recovery in consumer spending than previously anticipated.

According to research released on Sunday by authors, including its chief economist Jan Hatzius, the company previously anticipated 5.7% gross domestic product (GDP) growth in 2021 and 4.4% growth in 202.

They named the reason for their decision as a longer-lasting virus drag on virus-sensitive consumer services and an expectation that semiconductor supply won’t improve until the first half of 2022. Remarkably, this delayed inventory restocking until next year.

They also anticipate spending on some services and non-durable goods to remain persistently below pre-pandemic trends, especially if a shift to remote work results in some workers spending less overall.

Goldman Sachs lowered its fourth-quarter 2021 and first-quarter 2022 GDP estimates to 4.5% from 5%. Moreover, it cut its second-quarter 2022 estimate to 4% from 4.5% while shaving its third-quarter estimate to 3% from 3.5%.

However, it raised its Q4 2022 estimate to 1.75% from 1.5%.

The bank has revised its 2021 forecast lower for the second time in two months

Remarkably, it’s the second time the bank has revised its 2021 forecast lower in two months.

According to the bank’s team of economists, two main factors drove the change in its outlook. One is that COVID-19 relief programs are expected to wind down through the end of the year, reducing a source of income for some households.

Meanwhile, the other concern is that consumers are not doling out enough money on services to offset a decline in spending on goods.

The bank announced that consumers’ service spending will need to rebound quickly to compensate for a slump in goods spending as the latter normalizes from its current high level.

The bank added that it will likely prove challenging while COVID-19 cases remain high since many people still feel uncomfortable engaging in many activities that were routine before the pandemic.

It mentioned movie theater attendance as one sticking point. Notably, the James Bond film “No Time to Die” brought in $56m at the North American box office over the weekend.

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