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Goldman Sachs economists have cut their US GDP forecast by 2% for the second month in a row, citing the Delta variant's impact.
The bank's economists now predict that the US will have a 5.7% overall GDP in 2021, which is down from 6.2%.
However, this year's slowing growth could be a temporary result of a shift in consumer spending habits.
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Goldman Sachs economists have lowered their US growth forecasts for 2021 from 6.2% to 5.7%, citing consumers' expectations of a "harder road" ahead.
This revision comes after a weak August jobs report showed that the domestic economy added 235,000 jobs in August, well below the forecast of a gain of 7333,000 from a Bloomberg survey.
The US's consumption has increased by 16% since the outbreak and reached its pre-virus trend during the second quarter. However, Ronnie Walker, a Goldman economist, wrote that the road ahead is littered with obstacles.
Walker stated that the Delta variant already has a negative impact on Q3 growth and that fading fiscal stimulus as well as a slower recovery in service sector will be headwinds in medium-term."
The impact of the Delta variant has caused Wall Street to lower its growth forecast for the second month in a row. The economists reduced their US third quarter GDP estimate from 9% to 5.5% on August 18.
The US economy contracted 3.4% last year.
Walker pointed out that slower consumption growth has been offset by the fact that inventories have grown more expensive as supply-chain disruptions again hit production in the third quarter.
According to the note, weaker growth in 2018 will make way for a rebound in 2022. The Goldman economists have raised their estimate for US GDP growth from 4.3% to 4.6% in 2022. This is an increase over the previous estimate of 4.3%.
Two reasons are why economists don't think this year's slowing down growth will last or get worse:
The economist stated that "First, our best guess based on some European countries' experiences and the recent decline of domestic positivity rates-is the US virus cases will begin falling later in the month."
Second, economic activity has become less susceptible to the virus in recent waves.
He wrote that "people have adjusted their spending habits, widespread vaccinations have reduced the likelihood of government restriction, and vaccinated people are less likely to disengage from the economic system."
Goldman stated earlier this month that the fears about the Delta variant might be exaggerated and suggested there is still time for solid stock market gains before stimulus effects fade.
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