US 2Q GDP Forecast Slashed by Goldman

Goldman Sachs economists have made the forecast on the second quarter (from April to June) of US GDP and expect the U.S. economy grew just barely to pass the mark.

The investment bank hence, has slashed its GDP forecast for the second quarter “to just barely above water”.

Specifically, the economists have slashed their outlook to an annualized gain of just 0.7%, down from the previous expectation of a 1.9% increase.

The Wall Street firm’s adjustment follows a report Thursday morning showing that the U.S. trade deficit declined in May to $85.5 billion, the lowest level of 2022. The released official number was influenced by a $2.8 billion decrease in the shortfall with China, as the nation grappled with lockdowns brought on by a COVID surge.

“The details of the May trade report were weaker than our previous assumptions, and we now expect real goods imports to remain elevated through June,” Goldman was quoted as saying in its report.

The GDP adjustment comes amid a darkening outlook for the economy and some expectations that a shallow recession may even have arrived already.

In a related adjustment, the Atlanta Federal Reserve updated its GDPNow tracker Thursday morning to show an expected Q2 decline of 1.9%. That, however, was a slight improvement from July 1, when the gauge pointed to a 2.1% drop.

Fed officials have expressed optimism that the economy can skirt a recession despite tighter policy aimed at controlling runaway inflation. The central bank has raised benchmark borrowing rates by 1.5 percentage points this year and expects to keep going to a “restrictive” rate aimed at pulling back growth.

Meanwhile, Wells Fargo forecasts see GDP falling 0.2% in 2022 and rising 0.9% in 2023 in contrast of their previous respective forecasts were for a gain of 1.5% and a decline of 0.5%.

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