Goldman Sachs Group Inc. economists raised their growth forecasts for the U.S. this year and beyond after President-elect Joe Biden unveiled a sweeping revival plan calling for $1.9 trillion in spending.
In a weekend report to clients, economists led by Jan Hatzius predicted the economy would expand 6.6% this year, faster than the 6.4% previously expected. The unemployment rate for the end of 2021 is now seen at 4.5%, down from the prior estimate of 4.8%.
The upgrade is fueled by expectation that Biden, aided by a Democratic-controlled Congress, will deliver ample amounts of state fiscal aid, education and public health spending, as well as unemployment insurance benefits, to counter harm from a pandemic now in its most devastating stage to date. Goldman’s estimate for 2021 economic growth is the second highest in a Bloomberg survey of 84 economists; the median estimate is 4.1%.
While the economists don’t expect all parts of Biden’s proposal to pass, they predict that an additional $1,400 in individual stimulus payments will cause a “large spike” in disposable income in the first three months. On Thursday, Goldman raised its estimate for the amount of stimulus Biden will win to $1.1 trillion, up from a previous forecast of $750 billion.
“We now forecast nominal disposable income will grow in 2021 by +4.5%” versus the previous estimate of 3.8%, according to Goldman’s latest note.
Goldman expects gross domestic product growth of 4.3% in 2022 and 1.6% the following year. “We have not made any changes to our Fed forecast, and continue to expect that tapering will not begin until 2022 and that liftoff will occur in the second half of 2024,” the economists said, referring to their previous forecast on when the Federal Reserve will raise interest rates.
Brian Deese, incoming director of Biden’s National Economic Council, warned Sunday the U.S. economy is “spiraling downward” and called for swift action.
This article originally appeared on Bloomberg.
