Investment bank Goldman Sachs has said the US economy is in recession or will soon be in a downturn stemming from housing and credit problems.
'The recent data suggest that the US economy is falling into recession,' Goldman Sachs economists said in a research note. 'We expect economic activity to contract modestly through late 2008, followed by a gradual recovery in the course of 2009.'
Goldman's views came two days after Merrill Lynch said a recession was 'a present-day reality' for the world's biggest economy.
Goldman Sachs said it expected the Federal Reserve to cut interest rates aggressively, bringing its main rate from 4.25% to 2.5% by late 2008.
Goldman Sachs cut its 2008 growth forecast for the US to 0.8% from 1.8%, with gross domestic product - or total economic output - declining in the second and third quarters. A recession is generally defined as two consecutive quarters of declining output.
