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US GDP Forecast – Weaker Growth According to Goldman Sachs Report

US GDP Forecast - Weaker Growth According to Goldman Sachs Report

The US bank, Goldman Sachs, reduced its 2019 GDP forecast from 2.4 percent to 2 percent and below 2 percent in the second half in the US. However, the bank said that it was parti9cularly worried about a recession. While the bank does not see a recession it did say that volatile financial markets and softer economic data has encouraged the reduction in expectation for growth in 2019, to below 2 percent in the second half. The fear that markets have been beaten down and have seen increased volatility are not great. The Federal Reserve embarked on a path to gradually hike interest rates – the GS report says that the Fed will start to slow down the pace of hikes in the coming months. History does point to the Fed being flexible and changing interest rate hike or cut policy quickly, so the idea of pausing rate hikes in 2019 does make historical sense.

Goldman did say that the impact of falling stocks and rising interest rates would likely be offset by higher wages and weaker oil prices. And the tighter labor market and higher tariffs from the US – China trade war will  trigger an increase in inflation with prices moving higher by 2.1 percent. The Goldman report did throw some cold water on investor sentiment.

According to the bank the good news remains in the strong labor market, the best in over 50 years. And the unemployment rate is expected to move down to 3.25 percent by the end of next year, and this implies that there will be a solid labor market over the next 18 to 24-months. We must ask that even if there is weaker growth, much of the voting public will still have jobs in 2020. This of course has implications for future elections.

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