Goldman Downgrade U.S. GDP Forecast

Goldman Sachs downgrade their U.S. GDP forecast “to reflect higher oil prices and other drags on growth related to the war in Ukraine.”

• “Oil and commodity prices have risen sharply since Russia invaded Ukraine. Our commodity strategists’ near-term crude oil and agricultural commodity forecasts imply an effective 0.7% drag on real disposable income that will weigh on spending in 2022. We also expect modest drags on growth from further tightening of financial conditions, lower consumer sentiment, and slower growth in Europe, and see additional downside risks if shortages of key metals constrain U.S. production.”
• “As a result, we now forecast GDP growth of +0.5%/+1.5%/+2.5%/+2.5% in Q1-Q422 (vs. 1.0%/2.5%/2.5%/2.0% previously), lowering our 2022 real GDP growth forecast to +1.75% on a Q4/Q4 basis (vs. +2.0% previous; 2.7% consensus). This forecast implies below potential growth in Q122 and Q222 and potential growth for 2022 overall, and we now see the risk that the U.S. enters a recession during the next year as broadly in line with the 20-35% odds currently implied by models based on the slope of the yield curve.”