Goldman Sachs Lowers US Growth Forecast for This Year Despite Strong Consumer Spending

Concerns Over Consumption Stagnation Due to COVID-19 Resurgence
ISM June Service Sector Index Enters Expansion at 57.1

A shopping mall in the California area, USA
Photo by Reuters Yonhap News

[Asia Economy New York=Correspondent Baek Jong-min] Investment bank Goldman Sachs has downgraded its forecast for the U.S. economic growth rate due to the resurgence of the novel coronavirus infection (COVID-19).

According to CNBC and other outlets on the 6th (local time), Goldman Sachs revised its forecast for the overall U.S. Gross Domestic Product (GDP) growth rate this year from -4.2% to -4.6%.

Goldman Sachs lowered its Q3 GDP growth forecast from the previous 33% to 25%. While maintaining the view that the U.S. economy would begin to recover starting in the third quarter, it estimated that the rebound would be smaller due to the recent resurgence of COVID-19.

Goldman Sachs expected consumer spending, which had recently shown signs of recovery, to stagnate in July and August. However, it predicted that the U.S. economy would re-enter a recovery phase in September. Goldman Sachs estimated that manufacturing would be relatively less affected compared to the service sector.

Jan Hatzius, Chief Economist at Goldman Sachs, diagnosed, "The recent surge in COVID-19 cases in Texas, Arizona, and Florida has begun to have a significant impact on the U.S. economy."

The U.S. ISM Services Index for June, released that day, returned to expansion territory at 57.1 after three months, but with COVID-19 cases reaching record highs and many states halting the expansion of economic activities, it warned that the future situation cannot be viewed optimistically.

Goldman Sachs maintained its growth forecast for the U.S. next year at 5.8%. Reflecting recent improvements in unemployment indicators, it lowered the year-end unemployment rate forecast for this year from 9.5% to 9%.