Goldman cuts U.S. recession risk (S&P Complete Indices:SP500)

A string of positive economic data in recent days has prompted Goldman Sachs to lower its forecast for the U.S. economy to 20% from 25% next year.

In a research note issued on Saturday, the investment bank said: He pointed to further cuts in the next 12-month outlook, subject to more good news ahead of the Fed’s next FOMC meeting in September.

On August 2, Goldman Sachs raised its recession gauge from 15% to 25%. “We have now lowered it to 20% because data since August 2—including retail sales and this week’s jobless claims—show no sign of a recession,” the team wrote.

The U.S. Census Bureau said Thursday that retail sales in the country rose 1.0% in July, beating economists’ expectations for a 0.3% gain. The previous day, data on initial jobless claims for the week ended Aug. 10 showed an unexpected decline.

Wall Street has regained its momentum in response, with the S&P 500 posting its best weekly advance since late October 2023 on Friday.

“If the August jobs report, due on September 6, looks reasonably good, we may lower the probability of a recession to 15%, which it has been for almost a year,” wrote Goldman Sachs economist Jan Hatzius and his team.

“We are now more confident in our expectation that the FOMC will cut rates by only 25 basis points at its September 17-18 meeting,” they claimed. However, Goldman added that an unexpected September 6 jobs report could lead to a 50 basis point cut.