Goldman Sachs predicts big slowdown in GDP growth prior to 2020 elections
As I write this, the Dow is sliding faster than creamy ranch McNugget sauce down Donald Trump’s moobs at a Mar-a-Lago sauna.
And now, one of the world’s most closely followed financial prognosticators, Goldman Sachs (yes, the vampire squid itself), is predicting a significant slowdown in U.S. GDP growth for the coming year.
Goldman Sachs believes the U.S. economy will slow significantly in the second half of next year as the Federal Reserve continues to raise interest rates and the effects of the tax cut fade.
“Growth is likely to slow significantly next year, from a recent pace of 3.5 percent-plus to roughly our 1.75 percent estimate of potential by end-2019,” wrote Jan Hatzius, chief economist for the investment bank, in a note to clients on Sunday. “We expect tighter financial conditions and a fading fiscal stimulus to be the key drivers of the deceleration.”
The Squid isn’t predicting a recession, but GDP growth and stock market success have been two of the legs of Donald Trump’s rickety stool of economic “accomplishments.” If they falter — and if job growth slows concomitantly — the dude will be burned toast with marmalade.
The bank sees the economy expanding at 2.5 percent in the fourth quarter of this year, down from 3.5 percent last quarter. Real GDP growth will come in at 2.5 percent again in the first quarter of 2019, but then will slow to 2.2 percent, 1.8 percent and 1.6 percent in the next three quarters, respectively.
Goldman sees the Fed raising rates this December and then four more times in 2019. It will do so because inflation will reach 2.25 percent by the end of next year because of tariffs and increasing wages, the bank predicted, noting there was also a chance of an “inflation overshoot.”
Yes, those tariffs. If Trump had picked up a fourth-grade history textbook anytime in the past 40 years and stumbled on a cartoon about Smoot-Hawley, we may have been able to avoid that particular wrench in the global economy. Left unmentioned is the fact that the Republican tax scam — which even low-information voters have come to see was nothing but a plutocrat-friendly boondoggle — unnecessarily goosed the economy when it was already cruising close to maximum warp speed. And that has forced the Fed to respond more vigorously than it might have otherwise.
So instead of steady growth that benefits everyone, or a badly needed infrastructure bill, we’ve got economic instability (thanks to the tariffs), even more inequality, and an unsustainable sugar high.
Thanks, Donny. Enjoy being the most unpopular president in the history of the republic when your economic mirage turns out to be two farting camels fighting over a falafel wrapper.
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