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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED
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To: Voltaire who wrote (34508)3/24/2001 3:18:13 AM
From: stockman_scott  Read Replies (1) of 65232
 
Goldman Sachs Cuts Growth Forecast

Friday March 23, 4:50 pm Eastern Time

<<NEW YORK (Reuters) - Goldman Sachs on Friday cut its forecasts for U.S. economic growth in 2001, citing a first-quarter slump in business investment and a likely pullback in consumer spending triggered by steep stock market losses,

Goldman said in a research note that U.S. gross domestic product (GDP) would likely expand by 1.0 percent and 2.0 percent in the third and fourth quarters, down from earlier forecasts of 2.1 percent and 2.7 percent.

The Wall Street firm said it expected after-tax corporate profits to decline by 2.5 percent in 2001, more sharply than its earlier forecast for a 1.0 percent decline.

``The motivation for these changes is twofold. First, last quarter's sag in business investment has turned into a full-fledged bust, judging from persistent news of revenue and earnings shortfalls,'' a Goldman research note said.

``Second, the stock market's response to this bust virtually guarantees a negative wealth effect on consumer spending,'' it said.

Goldman said it expected the Federal Reserve would have to lower its benchmark federal funds rate, now at 5 percent, to the 3 to 4 percent range by late summer to revitalize the economy.>>
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