U.S. GDP growth forecasts lowered, inflation risk in limelight

A tourist poses for a photo with costumed characters on Times Square in New York, the United States, July 2, 2021. (Xinhua/Wang Ying)

Goldman Sachs trimmed the forecast of U.S. GDP growth in 2021 to 5.6 percent from 5.7 percent citing slower consumers' spending in services, the reduction in fiscal support and lingering semiconductor supply crunch. The U.S. economy is expected to expand 4 percent in 2022 rather than the earlier forecast of 4.4 percent.

NEW YORK, Oct. 14 (Xinhua) -- Investment bank Goldman Sachs Group has recently cut its forecast for U.S. GDP growth in 2021 and 2022 while industry experts have warned of risks posed by inflation.

The U.S. economy would expand 4 percent in 2022 rather than the earlier forecast of 4.4 percent, according to a recent report by Goldman Sachs.

Goldman Sachs also trimmed the forecast of U.S. GDP growth in 2021 to 5.6 percent from 5.7 percent citing slower consumers' spending in services, the reduction in fiscal support and lingering semiconductor supply crunch.

Inflation is the single biggest risk out there right now both in terms of the short-term risk it can have on the recovery and the longer-term risk it can have in respect of emerging markets, warned John Waldron, chief operating officer with Goldman Sachs, on Wednesday.

The International Monetary Fund (IMF) also slashed its 2021 growth estimate for the United States by one percentage point to 6 percent due to worsening supply chain disruptions and softening consumption, according to its World Economic Outlook report released on Tuesday.

"Headline inflation rates have increased rapidly in the United States and in some emerging market and developing economies in recent months, although there are differences in the extent of pressures across countries," said the IMF in the report.

People select goods at a supermarket in New York, the United States, Aug. 11, 2021. (Xinhua/Wang Ying)

There is going to be a long period of high energy prices extending into 2022 and experts with S&P Global Ratings are starting to become more concerned about the impact of higher energy prices on consumers, said Chris Midgley, global head of analytics with S&P Global Platts, on Thursday.

"As you get the higher gas prices, the only way of balancing is to shut down industry, still fertilizers, et cetera. And that, of course, dampens economic activity," Midgley told Xinhua at a virtual briefing.

There's some real concern now that perhaps the economy is seeing some headwinds and it's going to become increasingly difficult for the economy to sustain its expansion pace as economic drain from various headwinds is underestimated, according to Midgley.

The U.S. economy shrank 3.4 percent in 2020 due to the hit of the pandemic and experienced an impressing rebound in the first half of 2021 with unprecedented fiscal and monetary support.