The skyline of Lower Manhattan and One World Trade Center in New York City, and the Spirit of Water sculpture in Jersey City, New Jersey, on July 11, 2023. (Photo by Gary Hershorn/Getty Images)
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Goldman Sachs lowered its chances of a U.S. recession in the next 12 months, lowering the probability to 20% from 25% amid positive economic activity.
The investment bank’s chief economist, Jan Hatzius, cited a slew of better-than-expected economic data in a research note Monday.
“The main reason we cut rates is that recent data have strengthened our confidence that we can bring inflation down to acceptable levels without a recession,” he said.
Citing the resilience of U.S. economic activity, the chief economist said GDP grew at a 2.3% pace in the second quarter. A rebound in consumer confidence and a drop in the unemployment rate to 3.6% in June also added to Goldman’s optimism.
The U.S. economy grew at an annual rate of 2% in the first quarter. Last Thursday, Labor Department data showed that Initial jobless claims It fell to 239,000 in the week ended June 24, well below expectations for 264,000 and down 26,000 from the previous week.
There are also “strong fundamental reasons” to expect consumer price increases to continue to slow after June’s core inflation, which excludes food and energy. rise at the slowest speed From February 2021.
However, the investment bank expects growth to moderate in the ensuing quarters due to a sequential slowdown in growth in real personal disposable income.
“But looser financial conditions, a rebound in the housing market, and a continued boom in factory construction all point to continued growth, albeit below trend,” Hatzius said.
Goldman Sachs still expects a 25 basis point rate hike at the upcoming Fed meeting next week, but Hatzius thinks it could mark the last of the current cycle.
—CNBC’s Michael Bloom contributed to this report.