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Goldman cuts US growth forecast as consumer sees ‘harder path’

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Goldman Sachs Group economists revised down their forecast for growth in the US economy this year, pointing to a “harder path ahead” for the American consumer than previously anticipated. Overall expansion in 2021 is now seen at 5.7 percent, economist Ronnie Walker wrote in a report to clients on Monday.

That compares with an expectation of 6 percent published at the end of August. Walker said the weaker growth will follow through into more of a pickup in 2022. Goldman raised its forecast for that year to 4.6 percent, up from 4.5 percent previously.

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Explaining the downgrade for 2021, Walker wrote that American consumers are likely to spend less amid the Delta variant’s emergence, 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 Q3 growth, and fading fiscal stimulus and a slower service- sector recovery will both be headwinds in the medium term,” said Walker.

The bank also lifted its projection for the unemployment rate to 4.2 percent at end of 2021 from a prior estimate of 4.1 percent.