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America must prepare for a recession

Goldman Sachs lowered its forecast for economic growth in the United States to 2.4% this year and 1.6% next year, down from 2.6% and 2.2%, respectively, in previous forecasts.

In the same vein, Bank Chairman, Lloyd Blankfein, said that the United States should prepare for a recession, as there is a narrow path to avoid it.

“There are very high risks if companies and consumers do not prepare for this,” he added.

With soaring fuel prices and baby formula shortages, US consumer confidence slumped in early May to its lowest level since 2011.

US consumer prices rose 8.3% in April from a year ago, slowing slightly from March, but still among the fastest in decades.

Blankfein’s comments come on the same day that the company’s economists lowered their forecasts for US growth for this year and next to reflect the recent change in financial markets.

Goldman’s economic team led by Jan Hatzius expects US gross domestic product to grow by 2.4 percent this year, down from 2.6 percent. It also lowered its 2023 estimate to 1.6 percent from 2.2 percent.

The report called this a “necessary growth slowdown” to help cool wage growth and reduce inflation back toward the Fed’s 2% target. While the slowdown will increase unemployment, Goldman was optimistic that a sharp rise in unemployment could be avoided.

Blankfein noted that while some of the inflation will “disappear” as the supply chain crisis eases due to the coronavirus shutdown in China, “some of these things are a bit more stable, like energy prices.”

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