- Goldman Sachs economists cut their US GDP forecast for the second time in a month, citing the impact of the Delta variant.
- Economists at the bank now see overall US GDP for 2021 at 5.7%, down from a prior estimate of 6.2%.
- But an expected shift in consumer spending habits means this year's slowing growth may not last long.
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Goldman Sachs' economists lowered their US growth forecast for 2021 to 5.7% from 6.2% on expectations of a "harder path" ahead for consumers.
This revision follows a weak August jobs report that showed the domestic economy added a disappointing 235,000 jobs during the month, falling well short of a forecast for a gain of 733,000 from a Bloomberg survey.
While consumption in the US has jumped by 16% since the depths of the pandemic and hit its pre-virus trend in the second quarter, the path forward looks littered with hurdles, Goldman economist Ronnie Walker wrote.
"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," Walker said.
This is the second time in a month that the Wall Street firm revised down its growth forecast due to the impact of the Delta variant. On August 18, economists cut their third-quarter US GDP estimate to 5.5% from 9%.
The US economy contracted by 3.4% last year,
One offset to slower consumption growth is that the need to restock inventories has grown larger, as supply-chain disruptions have hit production again in the third quarter, Walker noted.
But weaker growth this year will set the scene for a pickup in 2022, according to the note. Goldman economists raised their forecast for US GDP growth to 4.6% in 2022, up from a prior estimate of 4.3%.
The economists don't expect this year's slowing growth to last long, or get much worse, for two reasons:
"First, our best guess-based on the experiences of some European countries and the recent decline in domestic positivity rates-is that US virus cases will start falling later this month," the economist said.
The second factor is economic activity becoming less sensitive to the virus in recent waves.
"People have adapted their spending habits, widespread vaccination has reduced the likelihood of government restrictions, and vaccinated individuals are less likely to voluntarily disengage from the economy," he wrote.
Goldman said earlier this month that fears over the Delta variant may be overblown, and argued there's a window of opportunity for solid stock-market gains before the effects of stimulus fade.