Goldman Sachs has cut its perception for U.S. economic activity for the near future, with the reasons being twofold: the slowdown in consumer spending and the rise of the COVID-19 Delta variant, CNN reported.
The gross domestic product (GDP) forecast has been cut by one percentage point for both the third and fourth quarters in 2021. This is a decrease from the 8.5 percent annual growth predicted before between July and September, with a dip to 5 percent for the final three months. The full year now sees a prediction of 6.6 percent GDP growth overall, according to CNN.
“The services categories where spending remains depressed are generally either associated with high virus risk, such as live entertainment events, or connected to office-based work, such as ground transportation or dry cleaners,” Goldman Sachs Economist Ronnie Walker wrote, per CNN.
He said the issue comes from the cyclical nature in which people spend, according to CNN. The pandemic, as an unusual time, saw people spending big on things like used cars, furniture and other household items. But with times of normalcy, people are known to spend more on things like concerts or dining out, which have been touch-and-go in the past year.
The growth is expected to keep slowing after 2021, CNN reported. It is likely to crawl back to the 1.5 percent to 2 percent growth common before the pandemic. And with the rise of the new Delta variant and more COVID-19 cases, things have been thrown back into uncertainty.
The recovery of the economy, following the inflation that can often come with rebounds, has seen businesses passing along the rising costs to customers.
The Consumer Price Index, which measures inflation, was at its fastest pace in 13 years as of June. In addition, the core price index, which doesn’t include food or energy, had risen 4.5 percent since 2020.