Goldman Sachs Holds Optimistic Outlook for US Economy, Forecasts Stronger Growth Than Consensus
In a surprising deviation from market consensus, investment bank Goldman Sachs has expressed a more positive outlook for the US economy. The bank predicts that the US GDP will grow by 2% in the fourth quarter of 2024, doubling the growth rate forecasted by economists in a recent Bloomberg poll.
While many economists are concerned about the possibility of a US recession in the next 12 months, Goldman Sachs sees less than a 20% chance of such an occurrence. In contrast, the Bloomberg consensus estimates the probability at approximately 50%.
To support its optimism, Goldman Sachs has highlighted 10 key reasons why it diverges from other forecasters. The first reason revolves around a potential consumer slowdown, but the bank believes that positive real wage growth and a strong job market will encourage spending and lead to 2% consumption growth this year.
Furthermore, Goldman Sachs dismisses concerns about rising consumer delinquency and default rates, contending that these figures mainly reflect a return to normalcy after years of unusually low levels. The bank also argues that a deterioration in the labor market is unlikely, citing high job openings and minimal layoffs.
Addressing concerns about a narrow breadth of job growth, Goldman Sachs argues that the current dominance of sectors such as healthcare, leisure and hospitality, and government is not problematic.
In addition, Goldman Sachs downplays worries about increasing corporate bankruptcies, asserting that most companies are financially stable and bankruptcies remain below pre-pandemic levels.
Addressing the looming debt maturity wall, the bank anticipates only a modest impact on companies, with higher interest expenses leading to a slight reduction in capital expenditure growth and hiring.
Regarding concerns about the commercial real estate market, Goldman Sachs clarifies that it is primarily offices that face significant challenges, and these represent only a small portion of banks’ loan portfolios.
Lastly, Goldman Sachs dismisses other factors such as the potential negative effects of higher interest rates, the fading of fiscal support, and a bank credit crunch, deeming them insignificant problems.
With these reasons, Goldman Sachs aims to provide a more optimistic perspective on the US economy, encouraging investors and businesses to maintain faith in its growth potential.
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