Goldman (GS) Getting Frisky on Economic Growth

Goldman Sachs (NYSE:GS) is getting even more bullish than they have on the U.S. economy, increasing its economic growth projections for 2011 and 2012 from 3.4 percent to 3.5 to 4 percent. This year they peg it at 5 percent GDP growth.

Jan Hatzius, Goldman Sachs' Chief U.S. Economist said, "It's a reasonably upbeat view. It’s certainly a reminder that there are still some significant risks in the global economy (food inflation), and of course especially to the extent that it affects oil prices and commodity prices more generally. Having said that, our outlook for global growth and the U.S. economy is pretty positive. We think close to 5% GDP growth this year and next year in the global economy and sort of 3.5-4% over the next two years in the U.S."

One good thing Hatzius admits which others are slow to, is that food price inflation isn't included in economic data at this time, and is still several months out.

He said once that happens there will be upward pressure on the headline CPI numbers.

Even so, Goldman sees consumer spending improving as the year goes on. "I think the first quarter looks a lot softer than a fourth. The number now on record for the fourth quarter is 4.4% ... I think it will come down a bit in the wake of the downwards revisions to the retail sales report. I think the first quarter will be softer. Over the next year or so, I would expect something like 3.5% consumer spending growth, definitely better than what you have seen for the last few years, though not as strong as the recent spurt," added Hatzius.

Somewhat surprisingly, Hatzius also said he sees unemployment dropping to 8 percent by the end of 2012, much lower than his previous estimate of 8.75 percent.