Goldman Sachs Group Inc. experts have revised their forecast regarding the risk of recession in the United States economic system, reducing the probability of the realization of the corresponding scenario next year from 25% to 20%.
Analysts at the mentioned financial institution have become more optimistic about the prospects for 2025 compared to the background of data on the dynamic retail sales in the US and information on jobless claims, which were published last week.
The Goldman Sachs economists led by Jan Hatzius said in a report to clients about the likelihood of revising the recession forecast towards a more optimistic vision. According to them, an appropriate assessment will be formed if the employment report in the United States, which will be published on September 6, looks reasonably good. Such content of the mentioned statistical data will be a sufficient reason for Goldman Sachs experts to reduce the risk of the probability of the materialization of a recession scenario in the space of the US economic system to 15%.
Recently, favorable indicators of the condition of the local economy have been recorded in the United States. The relevant data form a kind of platform for an optimistic perception of the prospects of the future. Against the background of the specified data, last week was the best for stock indexes in the current year. Buyers started taking shares after a rapid drop in corresponding activity this month.
The level of retail sales in the United States in July showed an increase that turned out to be the highest since the beginning of last year. The corresponding indicator grew by 1%. This information was published last week by the US Commerce Department’s Census Bureau. It is worth noting that experts interviewed by the media predicted that retail sales in the United States would grow by 0.3% in July. Against the background of these data, concerns about the slowdown in the economy have eased, which began to spread actively after the unexpected rise in the unemployment rate in the US last month to 4.3% after 4.1% in June. At the same time, in mid-August, separate government data showed a decrease in the number of applications for unemployment benefits.
Goldman Sachs experts also said that in the context of the current economic realities, their confidence has increased that the Federal Reserve will decide to cut interest rates by 25 basis points as part of the September policy meeting. At the same time, they noted that there is a possibility of lowering the mentioned indicator by 50 basis points if the employment report in the United States for August is very optimistic.
Returning to the topic of retail sales in the US, it is worth noting that currently there is also a point of view circulating among experts, according to which there is no guarantee yet and unequivocal evidence that the growth of mentioned sales in July is strong enough for retailers to have a reason to relax before the crucial fourth quarter and the holiday shopping season.
Also in July, the tendency was observed in the United States, which is that consumers bought more of most of the items they use for everyday life, except for so-called summer wardrobes and summer-related leisure equipment.
Moreover, total retail sales in product categories that are less discretionary and cheaper have increased. It is worth noting that food and beverage are standouts here.
Goldman Sachs experts also noted that the ongoing rise will make the United States economy more similar to other relevant systems of the G10 countries, where the Sahm rule has held less than 70% of the time. The Sahm rule signals the start of a recession when the unemployment rate rises by 0.50 percentage points or more relative to the previous 12 months. The experts of the mentioned financial institution also noted that in several smaller economies, including Canada, in the current cycle, there is an increase in the jobless rate without implementing a recession scenario.
It is worth noting that many other analysts also assess the probability of the mentioned scenario materializing in the economic system of the United States as low and deny the perception of the corresponding configuration of the state of affairs as a fait accompli for Washington. Claudia Sahm, chief economist at New Century Advisors, said during a conversation with media representatives that the US is not in a recession condition. At the same time, the expert noted that the corresponding scenario may still become a reality if the labor market is on a weakening trajectory.
The opinion currently dominates the markets, according to which the central bank of the United States will decide at its September meeting to ease the concept of monetary policy, implying cutting interest rates. At the same time, the probability that the US financial regulator will lower the cost of borrowing by 50 basis points is 28.5%, according to the market estimate.
Rashmi Garg, senior portfolio manager at Al Dhabi Capital, during a conversation with media representatives, said she expected the central bank of the United States to cut interest rates by 25 percentage points in September. At the same time, the expert noted that the decision of the US financial regulator may be different if the employment report for August indicates a significant deterioration in the labor market.
It’s worth noting that in the context of the approach to the issues of a likely change in monetary policy, the central bank of the United States adheres to the position according to which before deciding on lowering the cost of borrowing, the Fed officials should obtain the maximum possible amount of data evidence of a steady movement of inflation towards the target of 2%.
