Investment bank Goldman Sachs (GS) has lowered its forecast for a U.S. recession to 20% after evaluating recent labour market and retail sales data.
Previously, economists at Goldman Sachs had placed the chances of a recession in America within the next 12 months at 25%.
The reduction is a bit of a flip-flop for Goldman Sachs, which earlier in August had raised its forecast for a U.S. recession to 25% from 15% after a July jobs report showed slowing growth.
The weak labour market report for July triggered a sharp 8.5% decline in the U.S. stock market, though share prices are now recovering.
The economists at Goldman Sachs said in a note to clients that they were taking the odds of a recession down to 20% after examining more recent labour market and retail sales data.
In the note, Goldman Sachs said that they currently see “no sign of a recession” in the U.S.
Retail sales for July increased by 1%, which was much better than an estimate of 0.3% growth. At the same time, weekly unemployment benefit claims came in much lower than forecast.
The note from Goldman Sachs concludes that a strong jobs report for August, which is due to be made public on Sept. 6, would likely lead the investment bank to move its recession probability back to 15%.
Futures traders are betting 100% that the U.S. Federal Reserve will cut interest rates at its next policy meeting in September, with a majority expecting a 25-basis point reduction.
The stock of Goldman Sachs has increased 30% so far in 2024 and currently trades at $504.26 U.S. per share.
