Goldman Sachs cuts chances of US recession to 20% from 25% by Reuters

(Reuters) – Goldman Sachs cut the odds that the United States will enter a recession in the next 12 months to 20 percent from 25 percent, following the latest weekly jobless claims and retail sales reports.

Earlier this month, the brokerage raised the odds of a U.S. recession from 15 percent after the jobless rate rose to a three-year high in July, sparking recession fears.

“We have now reduced our probability from 25% to 20%, mainly because data for July and early August released since August 2 show no sign of a recession,” Goldman Sachs chief economist Jan said on Saturday Hatzius, in a note.

“Continued expansion would make the US look more like other G10 economies, where the Sahm rule has held less than 70% of the time,” he added.

Thursday’s jobless claims report showed the number of Americans filing for jobless benefits fell to a one-month low in the previous week, while separate data revealed on the day that retail sales rose the most much in 1-1/2 years in July.

Hatzius said if the August jobs report looks “reasonably good,” he would cut the likelihood of a U.S. recession to 15 percent.

He says the Federal Reserve will cut interest rates by 25 basis points at its September meeting, but has not ruled out a 50 basis point cut if the jobs report misses expectations.