Downside risks to the U.S. economy have diminished in recent months, with data points providing some bright spots and reducing the possibility that the economy will slip into a renewed recession, Goldman Sachs’ top economist Jan Hatzius said in a note dated February 17. Hatzius said macroeconomic data, such as jobless claims, retail sales and manufacturing surveys, so far show the economy didn’t buckle under the $200 billion tax increase that took effect at the beginning of the year. But more importantly, he said, the Republicans in Congress seem to have given up on the idea of using the debt ceiling to force additional spending cuts. “So the tail risk that the overall fiscal drag will be much larger than the 11/2-2 percentage points we assume for 2013, and that this will push the economy below ‘stall speed’ and into a renewed recession, looks much lower now,” he said in the note.
Source: MarketWatch
