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Illustration: Aïda Amer/Axios
Economists at Goldman Sachs raised their GDP growth expectations for the U.S. economy to 8% for 2021 in a note to clients on Sunday night.
Why it matters: If Goldman's forecast is correct, it would mark the largest economic expansion for the U.S. in generations.
- Not only would 8% annual growth denote a stupendous turnaround from the coronavirus pandemic, it would significantly outpace the firm's growth expectations for the U.S. from as recently as late 2020.
What they're saying: "We have raised our GDP forecast to reflect the latest fiscal policy news and now expect 8% growth in 2021 (Q4/Q4) and an unemployment rate of 4% at end-2021 — the lowest among consensus forecasts—that falls to 3.5% in 2022 and 3.2% in 2023," Goldman said in the note.
- "But we expect inflation dynamics to mirror those last cycle, and therefore expect this forecast to translate to only 2.1% core PCE inflation in 2023."
Between the lines: Goldman has been exceptionally bullish on the prospects for U.S. growth all year, far outpacing most other Wall Street banks' expectations.
- The average growth expectation among Wall Street analysts is 4.7%, according to FactSet, and was 3.9% as recently as November.
- Further, economic growth of 8% with inflation reaching just 2.1% would be almost unprecedented.
By the numbers: A growth of 8% this year would put U.S. GDP at around $22.6 trillion, marking a full recovery after the economy shrank 4.1% in 2020.
- U.S. GDP hasn't grown 8% in a year since 1951, when it totaled $356 billion.
Of note: Goldman's metric tracks fourth quarter over fourth quarter growth, rather than year over year.