Goldman Sachs Reduces U.S. Recession Risk Amid Strong Economic Data Goldman Sachs Reduces U.S. Recession Risk Amid Strong Economic Data

Written By Michael Gary Scott

Goldman Sachs Cuts Recession Probability

Recent favorable macro data has led Goldman Sachs to revise its outlook on the likelihood of a U.S. recession next year, lowering it from 25% to 20%.

Economic Outlook Brightens

In a research note over the weekend, the investment bank adjusted its 12-month recession probability, contingent on more positive developments preceding the Fed’s upcoming FOMC meeting in September.

Data Backs the Decision

After increasing its recession gauge from 15% to 25% on August 2, Goldman Sachs attributed the latest adjustment to data releases post-August 2, such as robust retail sales and favorable jobless claims figures.

Market Reaction

The announcement of a 1.0% increase in July retail sales, surpassing economists’ expectations of 0.3%, coupled with a surprising drop in initial jobless claims for the week ending August 10, reignited a bullish sentiment on Wall Street.

Upcoming Jobs Report

The August jobs report scheduled for release on September 6 holds significant weight. A positive outcome could prompt another decrease in the recession probability to 15%, a level maintained for almost a year, according to Goldman Sachs economists.

FOMC Rate Cut Forecast

Expressing confidence in their predictions, Goldman Sachs foresees a 25 basis point rate cut by the FOMC during its meeting on September 17-18. However, the bank acknowledged that a dismal jobs report could necessitate a steeper 50 basis point cut.

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