Goldman Sachs trims US recession odds next year to 20%

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The U.S. economy has a better chance of skirting a recession next year than previously believed, according to Goldman Sachs strategists.

In a Monday analyst note, Goldman economists led by Jan Hatzius lowered their probability of a recession starting in the next 12 months to 20% from an earlier 25% forecast, citing better-than-expected economic data. 

«We are cutting our probability that a US recession will start in the next 12 months further from 25% to 20%,» Hatzius wrote. «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.»

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People walk past the New York Stock Exchange on July 12, 2023, in New York City.  (Spencer Platt/Getty Images / Getty Images)

The note comes less than one week after the government reported that the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose just 0.2% in June from the previous month. Prices climbed 3% on an annual basis, the slowest pace in more than two years.

The report also pointed to a faster-than-expected decline in core inflation, which climbed just 4.8% on an annual basis — the lowest level since 2021. 

Despite the continued retreat in inflation, the Federal Reserve is widely expected to approve another quarter-percentage interest rate increase at the conclusion of its two-day meeting next week. However, Hatzius said he expects this will be the final increase in the Fed's tightening cycle amid fears that