Goldman Sachs lowers US recession odds to 20%

Goldman Sachs has lowered the odds of a US recession in the next 12 months to 20 per cent from 25 per cent, following recent jobless claims and retail sales data.

Earlier this month, the firm raised the recession odds to 25 per cent from 15 per cent after the unemployment rate hit a three-year high in July, raising concerns about a downturn.

Goldman Sachs chief US economist Jan Hatzius stated in a note on Saturday that the odds were lowered due to July and early August data showing no signs of recession.
“Continued expansion would make the US look more similar to other G10 economies, where the Sahm rule has held less than 70 per cent of the time,” He further noted

Thursday’s jobless claims report revealed a drop in unemployment benefits filings to a one-month low, while July retail sales saw the most significant increase in 1.5 years.

Hatzius suggested that if the August jobs report is favourable, the recession odds could be cut to 15 per cent. He also maintained that the Federal Reserve is likely to reduce interest rates by 25 basis points in September, with the possibility of a 50 basis point cut if the jobs data disappoints.

Attribution: Reuters

Subediting: M. S. Salama