Goldman Sachs said on Friday that it is cutting the firm’s estimates for US growth in the second half of this year to between 1% and 1.5%, as it sees the economy “losing further momentum.”
“In light of the downshift in the data this week, we are cutting our second-half growth forecasts further,” Goldman said in a research note. It was the firm’s third cut in GDP estimates in August.
Goldman now expects Gross Domestic Product growth of 1.0% in the third quarter and 1.5% in the fourth — both down from 2.0% previously.
“From already quite low growth rates, it appears that the US economy is losing further momentum,” Goldman said.
According to its Current Activity Indicator (CAI), the underlying annual growth rate was about 1.5% as of July, and several major indicators for last month were surprisingly strong.
“However, timelier survey-based data have turned down sharply, and weakness in the hard statistics seems likely to follow with a lag,” Goldman said.
It said that against this “challenging backdrop,” Federal Reserve Chairman Ben Bernanke will deliver an address to the Fed’s annual Jackson Hole Conference next week.
Goldman expects his speech to contain three main elements: a discussion of the Fed’s dimmer growth outlook, a defense of its past policy actions, and an outline of easing options, focused primarily on changes in the Fed’s balance sheet.
“We see several reasons why Fed officials may prefer to change the composition of the balance sheet before expanding it further, and think this could be an important component of the speech,” Goldman said.
“If used aggressively this approach could have a significant impact, and it may be less controversial. We do not think Bernanke will signal anything more unconventional.”
Goldman now expects Gross Domestic Product growth of 1.0% in the third quarter and 1.5% in the fourth — both down from 2.0% previously.
“From already quite low growth rates, it appears that the US economy is losing further momentum,” Goldman said.
According to its Current Activity Indicator (CAI), the underlying annual growth rate was about 1.5% as of July, and several major indicators for last month were surprisingly strong.
“However, timelier survey-based data have turned down sharply, and weakness in the hard statistics seems likely to follow with a lag,” Goldman said.
It said that against this “challenging backdrop,” Federal Reserve Chairman Ben Bernanke will deliver an address to the Fed’s annual Jackson Hole Conference next week.
Goldman expects his speech to contain three main elements: a discussion of the Fed’s dimmer growth outlook, a defense of its past policy actions, and an outline of easing options, focused primarily on changes in the Fed’s balance sheet.
“We see several reasons why Fed officials may prefer to change the composition of the balance sheet before expanding it further, and think this could be an important component of the speech,” Goldman said.
“If used aggressively this approach could have a significant impact, and it may be less controversial. We do not think Bernanke will signal anything more unconventional.”
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