Odds of U.S. recession in next year cut to 20% by Goldman

The U.S. economy has a better chance of avoiding a recession in the next 12 months following recent positive data on economic activity and inflation, according to Jan Hatzius, the chief economist at Goldman Sachs Group Inc. 

"We are cutting our probability that a U.S. recession will start in the next 12 months further from 25% to 20%," Hatzius wrote in a report published Monday. "The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession."

Hatzius cited "strong fundamental reasons" to expect an ongoing easing in inflationary pressures after a July 12 Bureau of Labor Statistics report showed core inflation excluding food and energy in the U.S. eased last month to the slowest pace since 2021.

Moreover, while the Federal Reserve is set to raise its benchmark interest rate again next week, it will probably mark the last in a string of increases that began last year, he said.

"We do expect some deceleration in the next couple of quarters, mostly because of sequentially slower real disposable personal income growth — especially when adjusted for the resumption of student debt payments in October — and a drag from reduced bank lending," Hatzius wrote.

"But the easing in financial conditions, the rebound in the housing market, and the ongoing boom in factory building all suggest that the U.S. economy will continue to grow, albeit at a below-trend pace."