Investment Strategies

US Economy's Big Growth Slowdown Is Coming - Goldman Sachs

Tom Burroughes Group Editor 21 November 2018

US Economy's Big Growth Slowdown Is Coming - Goldman Sachs

The world's largest economy is faring well at the moment but growth will decelerate sharply into the second half of next year, according to the Wall Street firm.

Goldman Sachs predicts that the US economy will slow sharply in the second half of 2019 because of rising US Federal Reserve rate rises and the fading impact of last December’s tax cut package, according to reports.

“Growth is likely to slow significantly next year, from a recent pace of 3.5 per cent-plus to roughly our 1.75 per cent estimate of potential by end-2019,” Jan Hatzius, chief economist for the firm, was quoted as saying in a note to clients (source: CNBC). “We expect tighter financial conditions and a fading fiscal stimulus to be the key drivers of the deceleration.”

The US-listed firm, which provides wealth management to ultra-high net worth clients as part of its offering, predicts that the US economy will expand by 2.5 per cent in the fourth quarter of this year, down from 3.5 per cent last quarter. Real GDP growth will be 2.5 per cent again in the first quarter of 2019, but then will slow to 2.2 per cent, 1.8 per cent and 1.6 per cent in the next three quarters, respectively, the report said.

The bank predicts that the US central bank will raise rates in December, and then a further four times next year, and the Fed expects inflation to reach 2.25 per cent by the end of 2019 as rising wages and tariff rises bite.

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