Forecast lowered again: Goldman Sachs sees lower probability of short-term recession in the USA

• Goldman Sachs believes there is a lower probability of recession
• Major US bank has lowered forecast again
• Fears of recession are diminishing

The experts at the major US bank Goldman Sachs still saw the risk of a US recession within the following twelve months at 35 percent after the turbulence in the banking sector and the bankruptcies of regional banks in the spring. They warned that the high level of uncertainty surrounding deposit security, corporate financing and lending could spill over to companies in other sectors and private households, which would significantly slow down overall economic sentiment. At the same time, the dispute over the debt ceiling in the USA had significantly increased the risk of an economic downturn.

Goldman Sachs believes there is a lower probability of recession

Since then, Goldman Sachs has adjusted its outlook downwards several times. In June, research staff wrote in an online post: “The likelihood of a U.S. recession next year has diminished as the risk of a disruptive debt-ceiling dispute has disappeared and stress in the banking sector is now only a modest burden on the economy seems to be”. Goldman Sachs reduced the risk of recession next year to 25 percent.

In July, the strategists lowered their forecast again. The experts led by chief strategist Jan Hatzius wrote that the probability of a recession in the USA over the next twelve months had fallen to 20 percent.

Forecast lowered again

A few tangents ago, Goldman Sachs once again lowered its forecast for a short-term recession in the USA. Goldman Sachs chief economist Jan Hatzius said the bank now sees a 15 percent chance of a U.S. recession over the next 12 months and suggested the Federal Reserve has likely ended its rate-hiking cycle, TheStreet reports.

Hatzius said the impact of the Fed’s long-term rate hikes would fade toward the end of the year “before disappearing completely by early 2024.” “Firstly, real disposable income is likely to accelerate again in 2024 due to continued solid employment growth and rising real wages,” said Hatzius. “Secondly, we still disagree with the idea that an increasing burden from the ‘long and variable delays’ of the monetary policy will push the economy into recession.”

US labor market

Previously, US job growth in August slightly exceeded expectations. The U.S. Labor Department reported that private and government jobs added 187,000 in August, while economists surveyed by Dow Jones Newswires had expected a gain of 170,000. However, the information for the previous two months was revised downwards: a job increase of 157,000 (preliminary: 187,000) was reported for July and 105,000 (preliminary: 185,000) for June. The separately collected unemployment rate rose from 3.5 percent to 3.8 percent in August – economists had expected a stable value of 3.5 percent. Hourly wages rose 0.2 percent compared to July to $33.82. Year-on-year they were 4.3 percent higher, down from 4.4 percent in July. Economists had previously expected a monthly increase of 0.3 percent and an annual rate of 4.4 percent.

Inflation and spending

Meanwhile, data from the Bureau of Economic Analysis from late August showed that the Fed’s preferred measure of US inflation, the core PCE index, has recently risen slightly. Meanwhile, spending has grown faster than forecast. US retail sales rose by 0.7 percent in July compared to the previous month. Economists had forecast an increase of just 0.4 percent. Sales excluding motor vehicles rose by 1.0 percent.

Experts are becoming more confident

The US bank Goldman Sachs is not alone in its more confident assessment: Bank of America now assumes that the US Federal Reserve’s interest rate increases will end in a “soft landing”. According to experts, growth is likely to fall below trend in the coming year, but will still remain positive. “We have revised our forecast for economic growth this year and next year upwards and no longer expect the economy to slip into a mild recession,” Yahoo Finance quoted US economist Michael Gapen from Bank of America. And stock market expert Jim Cramer also explained on his show “Mad Money” in July that there was now enough evidence to suggest that the recession arguments would not stand up to in-depth analysis.

Editorial office finanzen.net

Selected leverage products on Goldman Sachs

With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the leverage you want and we will show you suitable open-end products on Goldman Sachs

Leverage must be between 2 and 20