The skyline of lower Manhattan and One World Trade Center in New York City and the Waters Soul sculpture on July 11, 2023 in Jersey City, New Jersey. (Photo by Gary Hershorn/Getty Images)

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Goldman Sachs revised down its outlook for a US recession over the next 12 months, reducing the probability from 25% to 20% due to positive economic activity.

The investment bank’s chief economist Jan Hetzius cited better-than-expected economic data in a research report released Monday.

“The main reason for our cut is that recent data reinforce our belief that a recession will not be needed to bring inflation down to an acceptable level,” he said.

The chief economist said second-quarter GDP growth was 2.3%, citing resilient US economic activity. Goldman’s optimism also grew after consumer sentiment improved in June and the unemployment rate fell to 3.6%.

american economy 2% Extended at an annualized pace in the first quarter. Last Thursday, the figures of the Labor Department revealed that Initial Jobless Claims That fell to 239,000 in the week ending June 24, well below estimates of 264,000 and showing a decline of 26,000 from the previous week.

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There are also “strong fundamental reasons” to expect consumer price growth, excluding food and energy, to continue decelerating after June’s core inflation. slowest growing From February 2021.

However, the investment bank expects some deceleration in subsequent quarters as a result of sequentially slower real disposable personal income growth.

“But easing financial conditions, a buoyant housing market and a continued boom in factory construction suggest that the US economy will continue to grow, albeit at a slower pace than trend,” Hatzius said.

Goldman still expects a 25 basis point hike ahead of next week’s Federal Reserve meeting, but Hatzius believes this could mark the last of the current cycle.

— CNBC’s Michael Bloom contributed to this report.

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