There's an increasing chance that the U.S. economy is heading towards a recession, as gas prices keep rising due to fallout from the Russian invasion of Ukraine and inflation is the highest it's been since 1982.
Goldman Sachs economists said on Thursday that there is now a 35% chance of a recession in the next year.
Led by chief economist Jan Hatzius, the investment bank cut their 2022 forecast for growth to 1.75% from 2%, according to Bloomberg. The previous consensus for growth was at 2.75%, per MarketWatch.
"We now see the risk that the U.S. enters a recession during the next year as broadly in line with the 20-35% odds currently implied by models based on the slope of the yield curve," Hatzius said, per Yahoo Finance.
According to the U.S. Bureau of Labor Statistics' latest Consumer Price Index (CPI) that was released on Thursday, the all items index climbed to 7.9% over the last 12 months ending in February.
Last month, the food index and food at home index saw their largest increases since April 2020, going up a total of 1.0% and 1.4%, respectively.
The gasoline index rose 6.6% in February, and accounted for nearly one-third of the all items increases last month. The national average of gas is $4.33 per gallon as of March 11, according to AAA, with California leading the nation with an average of $5.72 per gallon.
Some governors have even called for a "gas tax holiday" to help slow down the prices of gas for the remainder of 2022.
Following President Joe Biden's ban on all Russian oil imports, the price for brent crude oil was trading for around $111 on March 11.
"Oil and commodity prices have risen sharply since Russia invaded Ukraine. Our commodity strategists’ near-term crude oil and agricultural commodity forecasts imply an effective 0.7% drag on real disposable income that will weigh on spending in 2022," Hatzius said.
"We also expect modest drags on growth from further tightening of financial conditions, lower consumer sentiment, and slower growth in Europe, and see additional downside risks if shortages of key metals constrain U.S. production."
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