Reduced Consumer Spending Leads Goldman Sachs To Cut Forecast For US Growth

In a report released on Sunday, economists at Goldman Sachs Group Inc GS say they expect a slower pace of growth for the U.S. economy due to a slower than anticipated recovery in consumer spending.

What Happened: The report issued by a Goldman team, led by Jan Hatzius, says the bank is now expecting a growth rate of 5.6% on an annual basis in 2021 and 4% for next year. The previous estimate was 5.7% for this year, and 4% for 2022, according to a Bloomberg report.

“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.

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The report indicates the two main challenges to growth in the medium-term are a slowing of fiscal support and the need for spending on services to make up for a decline in the purchases of goods.

Goldman economists also point to the ongoing computer chip shortage, saying they assume the issue won’t be resolved until the second half of next year. They say the continued inventory shortage will likely lead to “a less front-loaded recovery from here than we had expected.”

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