Up You Go! Goldman Sachs Predicts 8% American Economic Growth
Posted by Warm Southern Breeze on Tuesday, March 16, 2021
“We have raised our GDP forecast to reflect the latest fiscal policy news and now expect 8% growth in 2021 (Q4/Q4) and an unemployment rate of 4% at end-2021 — the lowest among consensus forecasts—that falls to 3.5% in 2022 and 3.2% in 2023.”
The la$t time U.$. GDP hit 8% growth wa$ in 1951.
The la$t time U.$. GDP hit 8% growth wa$ in 1951.
The last time U.S. GDP hit 8% growth was in 1951.
(Just wanna’ make sure you see it CLEARLY.)
- Goldman Sachs lifted its 2021 US growth forecast to 8% from 7.7%, citing new stimulus for the boost.
- The bank also expects Biden and Democrats to pass at least $2 trillion in infrastructure spending.
- That sum could hit $4 trillion if the deal includes education, child-care, and health-care spending.
Goldman Sachs joined its Wall Street peers in revising its US economic outlook on Saturday, pegging an increasingly bullish forecast to Democrats’ latest stimulus package.
The team led by Jan Hatzius now expects US gross domestic product to grow 8% in 2021 on a fourth-quarter-to-fourth-quarter basis, according to a note published Saturday. That’s up from the previous estimate of 7.7%. The bank’s full-year growth estimate climbed to 7% from 6.9%.
The current-year projection largely hinges on President Joe Biden’s stimulus plan, as Goldman had initially expected a $1.5 trillion deal to reach Biden’s desk. The $1.9 trillion plan signed by the president on Thursday will accelerate the nation’s economic recovery through the middle of 2021 before tapering off into 2022, the bank’s economists said. Stimulus checks’ rollout over the coming months will concentrate the plan’s positive impact in the second quarter, they added.
Democrats’ stimulus package is probably the last major pandemic-era relief deal, but key tenets of the plan are set to be renewed as the economy climbs out of its virus-induced hole. The bill’s expansion of the child tax credit will probably be extended or made permanent by Democrats, according to Goldman.
The $300 supplement to federal unemployment benefits will expire as planned in September, but expanded eligibility and benefit duration policies included in Biden’s package could be prolonged, the team said.
Next Stop: Infrastructure
Biden has said he aims to pass a massive infrastructure measure to further juice the US recovery. Such a plan will come with a price tag of at least $2 trillion, though details are scarce for now, Goldman said.Inclusion of funding for child care, health care, or education could push the sum to $4 trillion, though tax hikes would probably be needed to fund such a package, the bank added.
Biden campaigned on a $2 trillion package, though some Democratic senators indicate they favor even larger spending. Sen. Joe Manchin of West Virginia, an influential moderate member of the caucus, has said he could support up to $4 trillion, while Sen. Dick Durbin of Illinois, a member of party leadership, has said he could support $3 trillion.
Infrastructure spending would have a less pronounced impact on growth, but Goldman still sees the package driving a stronger expansion through 2022. The economy will expand 2.9% next year on a Q4-Q4 basis, up from the bank’s prior forecast of 2.4%.
House Democrats began planning their infrastructure pushon Friday. House Speaker Nancy Pelosi said she hopes to hold bipartisan talks on improvements to broadband, energy, and education, among other sectors. Yet after passing the stimulus bill without a single Republican vote, garnering support across the aisle could be difficult.
Goldman’s update follows similarly optimistic changes elsewhere on Wall Street. Morgan Stanley lifted its forecast on Tuesday to 8.1% on a Q4-Q4 basis. US GDP will fully rebound to pre-pandemic highs by the end of the first quarter and trend higher in the coming months as the economy fully reopens, the team led by Ellen Zentner said.
Separately, UBS projected growth would reach 7.9% from Q4 2002 to Q4 2021 as stimulus, falling COVID-19 case counts, and continued vaccination opened the door for a strong recovery. The bank, like Goldman, had expected Republicans to water down the size of the latest relief package. Passage of the full bill can help consumer spending lift the ailing services industry into 2022, economists led by Seth Carpenter said in a note to clients.
If Goldman Sachs’ forecast is accurate, it would also mark a wholesale economic recovery from the coronavirus pandemic-induced economic decline. The Bureau of Economic Analysis reported that last year, the economy retracted 4.1% from mass business closures and social restrictions which occurred in an attempt to reduce the coronavirus’ spread. But because of refusals of many to adhere to guidelines established by medical science, COVID-19 has devastated the American population with well over 500,000 deaths, and tens of millions of infections from the coronavirus. The exact numbers are not yet known, and many experts – medical, scientific, sociological, and others – agree that the total figures, losses, infections, and deaths, may not be known for several years.
Economic growth of 8% with accompanying low inflation would be almost unheard of. The U.S. Gross Domestic Product (GDP) has not increased at that rate since 1951, when the U.S. economic “golden age” began in the decade after World War II.
Goldman Sachs Predicting 8 Percent Growth In Us Economy: Report
https://thehill.com/policy/finance/543195-goldman-sachs-predicting-8-percent-growth-in-us-economy-report
Economists at Goldman Sachs raised their GDP growth expectations for the U.S. economy to 8% for 2021 in a note to clients on Sunday night.
Why it matters: If Goldman’s forecast is correct, it would mark the largest economic expansion for the U.S. in generations.
Not only would 8% annual growth denote a stupendous turnaround from the coronavirus pandemic, it would significantly outpace the firm’s growth expectations for the U.S. from as recently as late 2020.
What they’re saying: “We have raised our GDP forecast to reflect the latest fiscal policy news and now expect 8% growth in 2021 (Q4/Q4) and an unemployment rate of 4% at end-2021 — the lowest among consensus forecasts—that falls to 3.5% in 2022 and 3.2% in 2023,” Goldman said in the note.
“But we expect inflation dynamics to mirror those last cycle, and therefore expect this forecast to translate to only 2.1% core PCE inflation in 2023.”
Between the lines: Goldman has been exceptionally bullish on the prospects for U.S. growth all year, far outpacing most other Wall Street banks’ expectations.
The average growth expectation among Wall Street analysts is 4.7%, according to FactSet, and was 3.9% as recently as November.
Further, economic growth of 8% with inflation reaching just 2.1% would be almost unprecedented.
By the numbers: A growth of 8% this year would put U.S. GDP at around $22.6 trillion, marking a full recovery after the economy shrank 4.1% in 2020.
U.S. GDP hasn’t grown 8% in a year since 1951, when it totaled $356 billion.
Of note: Goldman’s metric tracks fourth quarter over fourth quarter growth, rather than year over year.
Biden Eyes First Major Tax Hike Since 1993 in Next Economic Plan
• raising the corporate tax from 21% to 28%;
• increasing the income tax rate on people making over $400,000;
• expanding the estate tax;
paring back tax preferences on pass-through businesses such as limited-liability companies, and;
• setting up a higher capital gains tax rate for individuals making at least $1 million.
• as part of infrastructure and job packages will likely include repealing part of former President Trump’s 2017 tax law that largely benefitted corporations and wealthy individuals
• stop U.S. companies from moving jobs and profits out of the country
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