Goldman Sachs senior chairman Lloyd Blankfein said a U.S. recession poses a “very, very high risk,” warning businesses and consumers should be prepared, Bloomberg reported Sunday (May 15).
Speaking on CBS’s ‘Face the Nation’, Blankfein said big business leaders should be “prepared for this”, as well as consumers. He said there could be a narrow way to avoid it, with the Federal Reserve having “very powerful tools” to fight inflation.
His words come as there has been an overabundance of issues such as high fuel prices for months now, as well as other issues that have arisen over the past week such as a shortage of baby formula. With that, consumer sentiment plummeted in early May to its lowest level since 2011.
Consumer prices rose 8.3% in April from a year ago. This percentage slowed slightly compared to March, but continued to go very quickly.
Goldman’s economics team thinks US gross domestic product will grow 2.4%, down from 2.6% as expected. The bank also now thinks the estimate for 2023 would be 1.6% instead of 2.2%. This was seen as a “necessary growth slowdown” to help keep wage growth stable and reduce inflation.
Unemployment is likely to rise, although Goldman does not believe there will be a “big rise” in unemployment.
PYMNTS wrote that the period of consumers spending freely and confidently may be coming to an end due to a number of factors listed above, including higher costs and the Russian-Ukrainian war.
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The report noted that consumer spending was very good until recently, when the aforementioned factors started to really affect things in early 2022.
JP Morgan’s debit and credit sales volume was $376.2 billion, up 26% from a year earlier. Other banks also posted similarly lavish gains, with holiday spending a big tailwind for many banks and helping with travel, entertainment and restaurants.