Goldman Sachs Group Inc. economists have revised their outlook on the US economy, reducing the risk of a recession in the next year from 25% to 20%. This positive adjustment comes on the heels of encouraging economic data, including strong retail sales and a decline in jobless claims.
The Goldman Sachs team attributed the revised recession risk to the positive economic indicators released last week. The upcoming August jobs report, scheduled for release on September 6, could potentially lead to a further reduction in the recession probability, potentially bringing it down to 15%. This would mark a return to a level maintained for nearly a year before an upward revision on August 2.
The US economy showcased its strength last week with a flood of positive economic data, driving stocks to their best weekly performance this year. July retail sales experienced their most significant surge since early 2023, while government statistics revealed the lowest number of unemployment benefit applications since early July.
The economists at Goldman Sachs also expressed increased confidence in the Federal Reserve’s potential decision to cut interest rates by 25 basis points at their September policy meeting. However, they cautioned that a disappointing jobs report on September 6 could trigger a larger rate cut of 50 basis points.
The revised recession risk is a positive sign for the US economy, highlighting its resilience in the face of global economic uncertainties. The surge in retail sales and decrease in jobless claims indicate a robust consumer sector, which is a crucial driving force in the US economy.
The potential interest rate cut by the Federal Reserve, as predicted by Goldman Sachs, could provide further stimulus to the economy, encouraging borrowing and investment. However, the economists’ caution about the upcoming jobs report underscores the delicate balance of factors influencing the economic outlook.
