US Economic Forecast Cut After Biden’s BBB Rejected

Senator Joe Manchin’s opposition to the Build Back Better Act prompted Goldman Sachs to quickly dim its US economic outlook.

The Wall Street firm told clients it no longer assumes President Joe Biden’s signature legislation will get through the narrowly divided Congress, citing the West Virginia Democrat’s announcement that he’s a “no” on the $1.75 trillion bill.

A failure to pass BBB has negative growth implications,” Goldman Sachs economists, led by Jan Hatzius, said in the research report.

Citing the “apparent demise” of Build Back Better, Goldman Sachs now expects GDP to grow at an annualized pace of 2% in the first quarter, down from 3% previously.

The bank also trimmed its GDP forecasts for the second quarter to 3% (from 3.5% previously) and the third quarter to 2.75% (compared with 3% previously). It specifically pointed to the expiration of the child tax credit and the lack of the other new spending that had been anticipated

Goldman Sachs (GS) reiterated that upcoming inflation reports are not likely to help swing the tide back in favor of Build Back Better. The consumer price index (CPI) rose in November by 6.8% from the year earlier, the biggest 12-month jump in 39 years.