Brighter Outlook: Goldman Sachs Optimistic On U.S. Economy, Cuts Recession Risk Down To 20%

In the wake of promising retail sales and jobless claims data, Goldman Sachs Group Inc. economists have revised the risk of a U.S. recession in the next year from 25% to 20%.

What Happened: The team of economists at Goldman Sachs reassessed the recession risk due to positive economic data released last week.

The upcoming jobs report for August, slated for release on September 6, could potentially lead to a further reduction in the recession probability to 15%, a level it maintained for nearly a year before an upward revision on August 2.

According to the report by Bloomberg, the U.S. economy showcased its strength with a flood of encouraging data, propelling stocks to their best week this year.

Retail sales in July witnessed the most significant surge since early 2023, and government statistics revealed the lowest number of unemployment benefit applications since early July.

Goldman Sachs economists also displayed increased confidence in the Federal Reserve’s potential decision to cut interest rates by 25 basis points at their September policy meeting.

Also Read: S&P 500 Records Best Week Of The Year Amid Favorable Economic Reports: What Really Drove The Rally?

However, they cautioned that a disappointing jobs report on September 6 could still trigger a 50 basis point move.

Why It Matters: The revised recession risk is a positive sign for the U.S. economy, reflecting the resilience it has shown amidst global economic uncertainties. The surge in retail sales and the decrease in jobless claims indicate a robust consumer sector, a critical component of 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.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.