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Goldman Sachs Lowers US Recession Odds To 20% Amid Positive Economic Data

Goldman Sachs has reduced its odds of a US recession in the next 12 months to 20% from 25%, citing positive economic data in the latest weekly jobless claims and retail sales reports.

The brokerage had earlier this month increased the odds of a US recession from 15% to 25% after the unemployment rate jumped to a three-year high in July, sparking fears of a downturn.

However, with the latest data showing no signs of recession, Goldman Sachs has revised its forecast.

“We have now shaved our probability from 25% to 20%, mainly because the data for July and early August released since August 2 shows no sign of recession,” said Jan Hatzius, Goldman Sachs’ chief US economist, in a note on Saturday.

The latest jobless claims report showed that the number of Americans filing for unemployment benefits dropped to a one-month low in the previous week.

Additionally, separate data revealed that retail sales increased by the most in 1-1/2 years in July.

Hatzius attributed the revised forecast to these positive indicators, stating, “Continued expansion would make the US look more similar to other G10 economies, where the Sahm rule has held less than 70% of the time.”

If the August jobs report appears “reasonably good”, Hatzius said he would cut back the US recession probability to 15%.

He maintained that the Federal Reserve would cut interest rates by 25 basis points at its September meeting, but did not rule out a 50 bps cut if the jobs report falls short of expectations.

Goldman Sachs’ revised forecast provides a glimmer of hope for the US economy, which has been facing concerns of a potential recession.

However, the brokerage remains cautious, emphasizing that the outlook is subject to change based on future economic data.

Boluwatife Enome

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