In a report released this weekend, Wall Street bank Goldman Sachs Economist Joseph Briggs lowered his FORECAST for U.S. GDP growth next year, saying the widespread spread of omicron poses risks and uncertainties for the economy.
Given the 0.5% boost to GDP in the fourth quarter from strong inventories, Briggs said in the report, the drag from the virus on economic recovery and supplies will be concentrated in the first half of next year, with 1.5% in the First and 0.5% in the second quarter. As a result, Goldman sachs revised its GDP growth forecast for next year down to 3.8% from 4.2%, while fourth-quarter growth slowed to 2.9% from 3.3%.
The report also stressed that omicron could slow the economic restart, but would have “only a modest impact” on spending in services.
Although the Delta variant remains the dominant strain circulating in the United States, omicron has also quietly taken root. The number of confirmed cases of Omicron has reached 16 states, according to local media reports, with multiple states reporting cases on Saturday. While most cases have been linked to travel history to South Africa, there have been several locally transmitted cases, including residents of Hawaii who had not recently left the region and a Minnesota man who had attended New York Comic-Con. Also Saturday, Connecticut Governor Ned Lamont announced the state’s first case of Omicron, in a man older than 60 who had traveled to New York for Comic-Con.
The Minnesota man said he was attending the Nov. 19-21 Event with about 30 friends from across the country, half of whom have tested positive for COVID-19 so far. The city said about 53,000 attendees and cast members were involved in November’s comic-Con event and hoped they would be tested as soon as possible.
Despite widespread market concerns about omicron, Goldman sachs also stressed that the impact on economic growth would not be excessive. Briggs said that while many questions remain unanswered, “we think the most likely scenario is that the virus is spreading faster, but the existing immunity is only slightly less protective against severe disease, which is also a mild downward trend.”
The Goldman sachs report also noted that the shortage could be more persistent if workers are worried about returning to work because of the mutant virus. There will also be supply chain shortfalls as external countries tighten their lockdowns due to the pandemic, but as vaccination rates rise among external trading partners, severe supply chain disruptions should be avoided.