Lloyd Blankfein, Senior Chairman of Goldman Sachs Group Inc., urged consumers and investors to get gear up as there is a very high risk of recession in the U.S.
The looming recession in the coming months
Blankfein said if he were running a large company or a consumer, he would be prepared for it on a Sunday CNBC show “Face the Nation.”
According to Goldman Sach’s former chief executive officer, the Federal Reserve has powerful tools to bring down inflation, and they have been responding well.
With the high fuel prices and a shortage of baby formula that measures Americans’ uneasiness tangibly, the decline in powerful sentiments in May was to the lowest level since 2011. Consumer prices in the U.S. increased by 8.3% in April compared to a year ago. Though the inflation was slightly lower than in March, it was still among the fastest rates.
As per Bloomberg News, Blankfein’s interview on CNBC was broadcast the same day Goldman Sachs economists reduced their U.S. Growth forecast for 2022 and were the next to think about the recent financial market shakeout.
Jan Hatzius, who leads the economist team at Goldman Sachs, now expects the gross domestic product of the U.S. will expand by 2.4% in 2022, lower than the earlier estimate of 2.6%. Goldman also expects the 2023 GDP estimates to decrease from 2.2% to 1.6%.
The report says that the necessary slowdown in growth will help to cool wage hikes and bring down inflation toward the 2% target set by the Federal Reserve.
Though the growth slowdown will push unemployment up, Goldman Sachs is optimistic that a sharp increase in joblessness can be avoided.
Blankfein feels that some of the inflation will go away due to supply chain disruption getting resolved and easing in Covid-19 lockdowns in China. However, things like energy prices are expected to reach more sticky.
According to Blankfein, Americans have benefited from globalization for an extended period as they made good services from cheap labor available overseas. He questions how comfortable the U.S. is when they now have to rely on supply chains that cannot be controlled outside the U.S. borders. He asks whether the U.S. feel good about having all their semiconductors from Taiwan, a product from China.
