We have lowered Q3 US GDP forecast to +5.5% – Goldman Sachs

In their latest forecast report, Goldman Sachs (GS) cites the Delta covid variant as the key concern to push them towards lowering the US Q3 GDP forecasts from 8.5% to 5.5% while also expecting a bump in the Fed’s preferred inflation gauge.

“The impact of the Delta variant on growth and inflation is proving to be somewhat larger than we expected,” said GS.

The US bank also added, “Spending on dining, travel, etc. is likely to decline in August, though we expect the drop to be modest and brief.”

The predictions cite Core PCE Inflation, the Fed’s preferred gauge of measuring the price pressure, to rise by 3.75% YoY at the end of 2021 before declining below 2.0% by the next summer.

It should be noted that the Q4 GDP forecast was revised up from 5.5% to 6.5%, resulting in an overall easy GDP for 2021 to 6.0% versus 6.4% previously expected. However, the 2022 growth is likely to firm to 4.5%, indicated by the reports.