Goldman Sachs‘ US Economics team, led by Jan Hatzius, continues to see the US economy staying out of recession. However, they warn that the risks are “high and rising.”
Here’s a breakdown from their latest report:
- “We forecast that real GDP will grow by 2.0% (annualized) in Q3 and 1.5% in Q4. In 2012 we expect average growth of 2.4% (Q4/Q4).” Depressed growth likely reflects “low confidence, tighter financial conditions and the lagged impact of the oil shock earlier this year.”
- “Recession risks are rising.” The probability of recession is greater than 1 in 3. Particular concerns include a “worsening of the European financial crisis” and failure to extend the payroll tax cut by a year.
- “We expect the unemployment rate to rise to 9.4% in 2012.”The rate will rise to 9.4% by Q1 2012 and hold at that level through the year.
- “Core inflation peaks around yearend.” Core PCE is expected to accelerate to 2.1% by Q4, due to higher vehicle prices, commodity inflation, and rising rent.
- “A continued easing bias from the Fed.” The Fed will likely announce a “return to balance sheet expansion sometime in the first half of 2012.”
- “Interest rates to rise gradually.” Goldman’s fair value estimate for the 10-year Treasury is 2.8%.
Photo: Goldman Sachs