Goldman Sachs sees lower US GDP growth in 2022 on worries Omicron could threaten recovery
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- Goldman Sachs cut its 2022 US GDP growth outlook on Sunday due to risks posed by the Omicron variant.
- The bank now sees annual US GDP growth for 2022 at 3.8%, lower than a prior estimate of 4.2%.
- This latest variant could further deteriorate the goods supply shortage if other countries tighten restrictions, Goldman said.
Goldman Sachs has cut its outlook for US economic growth in 2022, pointing to risks and uncertainty posed by the Omicron variant of COVID-19.
The bank now expects US gross domestic product growth to expand by 3.8% next year, lower than its prior annual estimate of 4.2%, and Q421/Q422 growth of 2.9%, down from 3.3%.
"While many questions remain unanswered, we now think a moderate downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely," Goldman economist Joseph Briggs said in a note published Sunday.
Omicron could interfere with the reopening, but only a "modest drag" on service spending is likely as virus-control policies and economic activity have become less sensitive to the spread of COVID-19, the note said.
The Omicron variant, first detected in South Africa and Botswana in early November, has now spread to one-third of US states. But US medical adviser Anthony Fauci told CNN on Sunday "it does not look like there's a great degree of severity" to the variant.
But Omicron could worsen the goods supply shortage if its spread in other countries warrants tightening of restrictions, according to Goldman's note.
"This was a major problem during the Delta wave, but increases in vaccination rates in foreign trade partners since then should limit the scope for severe supply disruptions," Briggs said.
Worker shortages are likely to persist as the spread of Omicron could push back the timeframe for some people to feel comfortable with returning to work, he added.
In terms of the outlook for inflation, Goldman put forth mixed implications. Lower demand for virus-sensitive services like travel could result in a temporary slowing of the pace of price inflation, but previous virus waves indicate such pressures will reverse, the bank said.
"In contrast, further supply chain disruptions due to Omicron or further delays in the recovery of labor supply could have a somewhat more lasting inflationary impact."
Other analysts say it's too early to judge the economic impact of Omicron, but believe most of the risks will likely be limited.
from Business Insider https://ift.tt/3ouzuS1
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