A child wears a protective face mask while carrying grocery bags outside Trader Joe’s on August 11, 2020 in New York Bishopric.
Noam Galai | Getty Images
Goldman Sachs economists said they see third quarter GDP growth dog at 35%, driven in large part by the surprising strength of consumer spending.
Goldman said its tracking forecast is now 14 part points ahead of the Wall Street consensus, and it sees the consumer contributing 12 points of that gap.
“Following the swell rise in spending in late spring and early summer, the virus resurgence and the surprise fiscal tightening threatened a U-turn. But spending instead rose strongly in July, and four high-frequency measures indicate a further 1-2% increase in real squander in August,” the economists wrote.
They said they included a 1.25% increase in August consumption in their GDP prediction, while the Atlanta Fed GDP Now, for instance, sees a decline in consumption.
“This aggregate increase conceals a decline among unemployment profit recipients, where Cardify data show August spending down 8% relative to July on average. Stated that the $600 top-up checks represented more than half of income for many such consumers, this assign decline is more moderate than we had previously expected,” the economists wrote. “The end-of-summer spending pace for unemployment benefit heirs and for lower-income zip codes more generally is also well above Q2 levels—and we expect it to rebound by late September as retroactive top-up check up ons arrive.”
As of July 31, unemployed Americans no longer received an extra $600 a week in pandemic relief but some did take into ones possession a federal payment of $300. The economists said it appears spending continued in late summer because of the high frugalities rate of the second quarter.
In addition to the surprise boost from consumers, Goldman said inventories have evolve into a positive this quarter. Goldman expects a 5.9 percentage point contribution.
Goldman economists had upgraded their predict to 35% growth from 30%, after the stronger-than-expected August jobs report earlier this month. Next quarter GDP declined 31.7%.
“Looking beyond this quarter, we remain upbeat on growth. Market participants appear to give birth to expected a higher economic price from the virus resurgence and the fiscal fizzle, and the sequential strength in the data in Q3 also presages well for Q4 and beyond. We also continue to expect a vaccine early next year, and much of the remaining output gap is refined in virus-sensitive sectors,” the economists noted.