Prepare for US Recession, Goldman’s Blankfein Says

Goldman Sachs Senior Chairman Lloyd Blankfein said a U.S. recession is at “very, very high risk,” warning that companies and consumers alike should be ready, Bloomberg reported Sunday (May 15).

Speaking on CBS’s “Face the Nation,” Blankfein said those running big companies should be “prepared for it,” along with consumers. He said there could potentially be a narrow way to avoid it, with the Federal Reserve having “very powerful tools” to fight off inflation.

His words come as there’s been a glut of issues such as high fuel prices for months now, along with other things cropping up in the past week such as a shortage of baby formula. With that, consumer sentiment declined in early May to its lowest level since 2011.

The consumer prices rose 8.3% in April compared to a year ago. That percentage slowed slightly from March, but was still going very quickly.

Goldman’s economic team reportedly thinks the U.S. gross domestic product will expand 2.4%, rather than 2.6% as previously expected. The bank also now thinks the 2023 estimate would be 1.6% rather than 2.2%. This was deemed a “necessary growth slowdown” to help keep wage growth stable and cut down on inflation.

Unemployment is likely to increase, though Goldman doesn’t think there will be a “sharp rise” in joblessness.

PYMNTS wrote that the period of time where consumers were spending freely and confidently might be coming to an end due to a number of factors listed above, including higher costs and the Russia-Ukraine war.

Read more: Banks’ Earnings May Show Days of Double-Digit Card Spend Growth Are Over

The report noted that consumer spending was very good up until recently, when the aforementioned factors began to really affect things in early 2022.

J.P. Morgan’s debit and credit sales volume was $376.2 billion, up 26% from the previous year. Other banks also saw similarly lavish gains, with holiday spending being a big tailwind for a lot of banks and helping out with travel, entertainment and dining.