(Reuters) – Goldman Sachs cut the odds of the United States entering a recession in the next 12 months to 20% from 25% following the latest weekly unemployment and retail sales reports.
Earlier this month, the brokerage raised the odds of a US recession from 15% after the unemployment rate rose to a three-year high in July, fueling fears of a recession.
“We have now upgraded our odds from 25% to 20%, mainly because data for July and early August released since August 2 do not point to a recession,” Goldman Sachs chief U.S. economist Jan Hatzius said in a blog post on Saturday.
“Continued expansion will make the US look more like other G10 economies, where Sahm's rule holds less than 70% of the time,” he added.
Thursday's jobless claims report showed the number of Americans filing for benefits fell to a one-month low last week, while mixed data was released on a day when retail sales rose to their highest level in 1-1/2 years in July.
Hatzius said that if the August jobs report turns out to be “reasonably good”, he will reduce the chances of a US recession to 15%.
He stressed that the Federal Reserve will cut interest rates by 25 basis points at its September meeting, but did not rule out a 50 bps cut if the jobs report does not meet expectations.
