Goldman Sachs lifts US GDP forecast to 6.6% in 2021 on Biden's $1.9 trillion stimulus package

• Goldman Sachs raised its US GDP forecast to 6.6% on Joe Biden's $1.9 trillion stimulus plan.
• Bank economists now project a lower US unemployment rate of 4.5%, down from 4.8%.
• Biden's $1,400 stimulus checks will cause a "large spike" in disposable income, they said.

Goldman Sachs has turned even more optimistic on the outlook for the US economy this year under President-elect Joe Biden.

In a weekend note to clients, economists at the bank raised their forecast for US GDP to 6.6% in 2021 from 6.4%. Goldman now expects a lower US unemployment rate of 4.5% at the end of 2021, down from 4.8%.

The projected economic expansion will be fueled by a boost in disposable incomes and government spending, the bank said, as Biden's $1.9 trillion stimulus plan accentuates his intent to shore up the slumping US economy. "We do not expect all of the elements of the $1.9 trillion proposal to pass, but we have raised our expectations for state fiscal aid, education and public health spending, unemployment insurance benefits, and several smaller items," Goldman economists wrote.

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Biden's economic rescue package that includes a $1,400 boost to stimulus checks, on top of a December measure of $600 per person, will cause a "large spike" in disposable income in the first quarter of 2021, the bank said.

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"We now forecast nominal disposable income will grow in 2021 by +4.5%," up from a prior estimate of 3.8%, the economists wrote.

After the Democrats won control of the Senate in the first week of this year, the bank raised its US GDP forecast to 6.4% because of the prospect of more fiscal stimulus to combat the fallout from coronavirus. Goldman expects a 4.3% growth for the US economy in 2022 and 1.6% growth in 2023. Read More: Bank of America says the warning signs that stocks are hurtling into bubble territory are growing - and pinpoints 6 that could signal a bear market is beginning