Goldman Sachs dropped the odds of a recession occurring in the next 12 months by another 10% to only a 25% chance.
The investment bank had previously said there was a 35% chance that a recession could occur.
DON'T MISS: Fears of a Big Recession Are Fading on Wall Street
The economy is likely to keep growing, even though the rate will slow down, Jan Hatzius, chief economist and head of global investment research at Goldman Sachs, told CNBC's ‘Squawk on the Street’ show.
“We are in a below-trend growth environment … but positive growth still seems more likely,” he said.
Other economists said they believe the U.S. economy will pull through because of an improving labor market, higher wages, decline in inflation rates and a boost in confidence from consumers.
“Consumer spending has been bolstered by a strong job market and rising wages, which have helped counter rising prices and higher borrowing costs,” said Jack Kleinhenz, chief economist of the National Retail Federation.
The efforts made by the Federal Reserve to curb inflation have not pushed it into recession territory, he said.
The gross domestic product grew at an annualized rate of 1.1% after a revision in the first quarter compared to the original estimate of 1.3%.
The GDP is expected to increase by only 1% for the year, Kleinhenz said.
"This suggests that GDP likely overstates U.S. economic growth and that higher interest rates, tighter credit and persistent inflation are having more of a concerted effect on the direction of the economy than suggested by GDP alone,” he said. “Given that, we continue to look for a soft landing this year.“
Consumers have lost some confidence in the economy, but personal consumption rose by 6.7% year over year in April and personal disposable income increased by 4.7%.
This shows that “the economy is holding up better than many have argued,” Kleinhenz said.
The University of Michigan Consumer Confidence Index which gauges sentiment about the economy fell to 59.2 in May, a decline of 4.3-point drop from April. The index fell to 50 last June, a record low.
Recession Fears Drop Among Companies
Companies are becoming less concerned about a potential recession impacting future earnings in 2023, according to data from FactSet.
The number of companies who are in the S&P 500 and cited a recession or slowdown as a concern declined for the third straight quarter, John Butters, a senior earnings analyst at FactSet wrote in a May 19 report.
During the earnings calls of S&P 500 companies from March 15 through May 18, there were 107 companies that mentioned the term “recession” during a call for the first quarter.
While this number is "well above" the five-year average of 77 and the 10-year average of 59, that the word recession peaked during the second quarter, he said.
The number of S&P 500 companies that discussed a recession on earnings calls for the first quarter of 2023 is 27% below the number during the fourth quarter in 2022 (147).
It is also 42% below the number in the third quarter of 2022 (184) and 55% below the number for the second quarter in 2022 (238).
