Goldman Sachs Downgrades US Growth Forecast Amid Omicron Fears

Goldman Sachs slashed its GDP growth forecast for both this year and the next, as the spread of the omicron virus threatens to derail the economic recovery.

According to a note seen by Bloomberg, Goldman economist Joseph Briggs downgraded the bank’s economic output estimate from 4.2% to 3.8% for 2021, and cut next year’s forecast from 3.3% to 2.9%. “While many questions remain unanswered, we now think a modest downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely,” Briggs explained.

Briggs added that omicron could slow down the pace of the economic reopening, particularly if it makes Americans more hesitant to return to the workforce. To make matters worse, the new Covid-19 strain also threatens to exasperate global supply shortages, especially if foreign trade partners decide to impose tighter restrictions.

With respect to inflation, Goldman forecasts that price pressures will likely subside for sectors directly affected by travel. On the other hand, though, labour and material shortages could worsen, and drive prices higher and into more permanent territory.

Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.