GOLDMAN Sachs has lowered the odds of the United States slipping into a recession in the next 12 months to 20 percent from 25 percent following the latest weekly jobless claims and retail sales reports.
Earlier this month, the brokerage raised the odds of a US recession by 15 percent 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 percent to 20 percent, 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 percent of the time,” he added.
Thursday’s jobless claims report showed the 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.
Hatzius said if the August jobs report seems “reasonably good,” he would cut back the US recession probability to 15 percent.
He maintains the Federal Reserve will cut interest rates by 25 basis points at its September meeting, but he did not rule out a 50 bps cut if the jobs report falls short of expectations.
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