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Market Analysis

Goldman Sachs cuts its prediction of a US recession from 25% to 20%
Amos Simanungkalit · 26.2K Views

12

 

Goldman Sachs has reduced the likelihood of the United States entering a recession within the next 12 months from 25% to 20%, based on recent jobless claims and retail sales data.

Earlier this month, the firm had increased the odds of a U.S. recession from 15% after July's unemployment rate surged to a three-year high, raising concerns about an economic downturn.

In a note released on Saturday, Goldman Sachs' chief U.S. economist, Jan Hatzius, stated, "We have now lowered our probability from 25% to 20%, primarily because the data from July and early August, released since August 2, shows no indication of an impending recession."

Hatzius also noted, "If the U.S. continues to expand, it will begin to resemble other G10 economies, where the Sahm rule has held less than 70% of the time."

Thursday's report on jobless claims indicated that the number of Americans filing for unemployment benefits dropped to a one-month low in the previous week. Additionally, retail sales data showed the largest increase in 1.5 years in July.

Hatzius mentioned that if the August jobs report is "reasonably strong," he would further reduce the U.S. recession probability to 15%.

He also expects the Federal Reserve to lower interest rates by 25 basis points at its September meeting, but he did not rule out a 50 basis point cut if the jobs report falls short of expectations.

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.

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