Rising Covid-19 Cases Prompt U.S. GDP Growth to Shrink 4.6% in 2020, Says Goldman Sachs

The recent Covid-19 cases spike in past few weeks prompted Goldman Sachs to lower the U.S. economy’s outlook this year, expecting a further contraction in full-year GDP growth of 4.6% from a previous forecast for a 4.2% shrink, meantime anticipated the economy to get back in track in September.

 

Goldman Sachs revised U.S. growth for 2020 due to a reimplementation of coronavirus restrictions after the world’s largest economy faced a 340,000 new infected cases over the past week, rising by 13.4%, with 3,447 deaths, a 2.9% increase. The resurgence in the Covid-19 cases nationwide weigh significantly on consumer services spending as it would keep Americans from returning to normal economic activities, such as going to restaurants, travel, or retailers.

 

“The healthy rebound in consumer-services spending seen since mid-April now appears likely to stall in July and August as authorities impose further restrictions to contain virus spread,” said the bank’s chief economist, Jan Hatzius.

 

“Over the last few weeks, the COVID situation in the U.S. has worsened significantly to the point where the U.S. is now a notable outlier among advanced economies,” he added. While expected the growth to rebound 5.8% in 2021 and the economy to get back on track in September, for two reasons:

 

“First, other major economies have returned to similar levels of activity while containing the virus, showing that further progress is feasible. Second, policy and behavioral changes such as mask wearing offer opportunities for controlling the virus at minimal economic cost. The recent implementation of a mask mandate in Texas shows that U.S. authorities are willing to adapt,” said Hatzius.

 

For the third quarter of 2020, Goldman Sachs saw GDP growing 25%, down from its previous expectation of a 33% increase and maintained its projection for 8% growth in the fourth quarter, as the manufacturing and construction industries have largely avoided such a halt and will continue their recovery.