Goldman Sachs economist: 25% to 30% chance of new US recession

13 August 2010

A senior official at Goldman Sachs has warned there is large potential for the US to fall back into recession.

Ed McKelvey, senior US economist for Goldman Sachs, wrote in a note to clients: "As signs of slower US growth have multiplied, market participants have become worried about the possibility of a double-dip recession."

He said the chances of this occurring are "unusually high" and estimated the probability at "between 25 per cent and 30 per cent", reports Bloomberg.

Five areas were identified as potentially offering protection against economic decline – housing, company hiring, household savings, automobiles, consumer durable goods and business spending on equipment.

Earlier this week, the Federal Reserve revised down its growth forecast for the US economy, stating that a "more modest" recovery is likely to take place than initially anticipated.

It said factors such as high unemployment, tight credit and modest income growth are all contributing to a constraint on household spending.

By Tony Aynsley

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