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 August 2 shows no sign of recession,” Goldman Sachs chief US economist Jan Hatzius said in a note on Saturday.
“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 1-1/2 years in July.
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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 at its September meeting, but did not rule out a 50 bps cut if the jobs report falls short of expectations.
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