Goldman Sachs has lowered the odds of the United States slipping into a recession in the next 12 months to 20% from 25% following the latest weekly jobless claims and retail sales reports.
Earlier this month, the brokerage raised the odds of a US recession from 15% after the unemployment rate jumped to a three-year high in July, sparking fears of a downturn.
“We have now shaved our probability from 25% to 20%, mainly because the data for July and early August released since August2 shows no sign of recession,” Goldman Sachs chief US economist Jan Hatzius said in a note at the weekend.
“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,” he added.
Thursday’s jobless claims report showed number of Americans filing for unemployment benefits dropped to a one-month low in the previous week, while separate data revealed on the day that retail sales increased by the most in 18 months in July.
Hatzius said if the August jobs report seems “reasonably good”, he would cut back the US recession probability to 15%.
He maintains the Federal Reserve will cut interest rates by 25 basis points (bps) at its September meeting, but did not rule out a 50 bps cut if the jobs report falls short of expectations.
Article Source – Goldman Sachs lowers odds of US recession to 20% from 25% – RTE
