One of the world’s leading consulting firms, Goldman Sachs, through its Chief Economist, has asked people to get ready for a long time of experiencing slow economic growth.
Jan Hatzius, the firm’s Chief Economist, shared the view in a discussion with Yahoo Finance during the Communacopia and Tech Conference organized by Goldman Sachs. He said Goldman Sach’s analytic expectation is in the trajectory of expecting a long period of growth under the trends.
Varying Reasons for Economic Downturn
He said that the reason for the economy’s softness at that time would have shifted from being the consumer to probably housing and other forms of the economy. The macroeconomy currently looks relatively weak. So, the feeling from foreign trade might turn out to be a negative one.
A sector of the US economy that bothers Hatzius, like many other people, is the housing issue. Housing in the US has been at the center of fighting increasing interest rates for a while now. The signs that there might be a significant slowdown in housing have increased over the last couple of months.
This comes as the mortgage rates for 30 years’ funds increased by more than 6% for the first time on Thursday since 2008. Hatzius said there is still some significant degree of weakness for Housing to face ahead.
Housing Crisis
Existing house sales dropped drastically for the sixth straight month two months ago, as reported by the Realtors’ association. The sales fell by about 5.9% from where it was in June and it amounted to a 20.2% drop from one year before then. The home sales cost at a median level increased by 10.8% year-on-year as it landed at $403,800, nevertheless, it declined a bit from the high figures recorded in June.
The Department of Commerce published a report that there was a sharp drop in selling single US family homes by 12.6% in July. There were 511,000 homes available in July, the sales turned out to be the lowest point in the records since 2016.
In spite of the many economic pressures the US economy is under, Hatzius is not in the number of people who think it might go into a recession next year. But he acknowledged that things might not be so pretty after all.
Hatzius said Goldman Sachs does not forecast that there will be a recession. He said the firm’s best calculation is that some positivity will still be seen but the growth will be quite subdued. Recession is significant but it is in a 1 to 3 probability, he said.