US tax changes will "boost growth slightly more in 2018" - Goldman Sachs

In its latest note, analysts at Goldman Sachs (GS) assess the impact of the US tax reform law on the US GDP going forward.

Key Quotes:

GS estimate an addition from the tax bill of 0.3% in 2018 and +0.3% in 2019.

GS increase their "GDP forecasts for 2018 and 2019 by 0.3pp and 0.2pp" on "a Q4/Q4 basis (to 2.6% and 1.7%)".

They cite an "incremental easing in financial conditions and continued the strong economic momentum to end the year".

Year-end 2018 unemployment rate forecast lowered by two tenths to 3.5%, "mainly reflecting a modestly higher expected pace of job growth".

Expect the unemployment rate to bottom in this cycle at 3.3%, at the end of 2019.

With more fiscal stimulus comes larger deficits.

“We are increasing our deficit projection”.

“We expect the deficit to rise to 3.7% of GDP in FY2018 and to 5% of GDP in 2019”.