Goldman cuts US recession risk following retail sales, jobs data

New York - Goldman Sachs Group economists lowered the probability of a US recession in the next year to 20 per cent from 25 per cent, citing last week’s retail sales and jobless claims data.

If the August jobs report set for release on Sept 6 “looks reasonably good, we would probably cut our recession probability back to 15 per cent, where it stood for almost a year” before a revision on Aug 2, said the Goldman economists led by Mr Jan Hatzius in a report to clients on Aug 17.

A flurry of data showing economic resilience in the United States drove stocks to their best week in 2024, with dip buyers stepping in after a recent rout.

The value of retail sales increased in July by the most since early 2023. Separate government figures showed the fewest applications for unemployment benefits last week since early July.

Goldman economists also said they have become “more confident” that the US Federal Reserve will cut interest rates by 25 basis points at its September policy meeting, “although another downside jobs surprise on Sept 6 could still trigger a 50bp (basis point) move”.

In an interview with the Financial Times published on Aug 18, San Francisco Federal Reserve Bank president Mary Daly said it is time to consider adjusting borrowing costs from their current range of 5.25 per cent to 5.5 per cent.

“Gradualism is not weak, it’s not slow, it’s not behind, it’s just prudent,” Ms Daly said to the newspaper, adding that the labour market, while slowing, was “not weak”.

In remarks earlier in August, she said it is too soon to know if the July jobs report signals a slowdown or real weakness, but cautioned that it is “extremely important” to prevent the labour market tipping into a downturn. She was “more confident” that inflation is headed towards the 2 per cent goal. BLOOMBERG, REUTERS