Why the US could avoid recession next year

- Plus: What does a new leader mean for Brazil's economy? Get the top GS intelligence below.  --------------------------------------------------------------- In today's edition: - In their 2023 Outlook, our economists expect the [U.S. to narrowly avoid a recession]( - Are [humanoid robots]( likely to be a feature in our lives soon? - “It's a rough zip code out there.” - Being a [cybersecurity entrepreneur]( is as difficult as it sounds. (Was this newsletter forwarded to you? [Sign up now.]( --------------------------------------------------------------- The US is forecast to escape recession as global growth slows [In their 2023 Outlook]( our economists expect the U.S. to narrowly avoid a recession next year as Europe's economy contracts. China's GDP is forecast to increase slowly during the first half of 2023 and then accelerate as covid restrictions are reduced. - In the U.S., core (PCE) inflation is expected to fall to 3% in late 2023 from 5% now, according to Goldman Sachs Research. The unemployment rate is forecast to increase modestly by 0.5 percentage points as the boom in job openings dissipates. The Federal Reserve's policy rate is expected to top out at 5-5.25%. - The euro area and the U.K. are probably already in recession, mainly because of surging energy prices that are weighing on income, consumption and industrial production. Our economists expect the downturn in Europe to be mild, in part because imports of Russian gas have already been cut without crushing economic activity. The economy could also get support from easing supply bottlenecks, and consumer spending could be propped up by a falling savings rate and an increase in credit. - Our economists expect China to begin to relax its zero-covid policy in April, and economic growth is poised to get a meaningful boost from reopening in the second half of the year that could extend into 2024. The property market will remain a headwind — the ongoing slide in housing will subtract about 1.5 percentage points from GDP next year as the sector reduces its debt burden and demographics shift. --------------------------------------------------------------- What Lula's election means for Brazil's economy and investors Brazil's recent election of leftist leader Luiz Inácio Lula da Silva could see the country's [fiscal situation deteriorate further in 2023]( as he looks to make good on a number of fiscally expensive policy promises, says Alberto Ramos, head of the Latin America Economic Research team in Goldman Sachs Research. “The country urgently needs policies and reforms that would leverage investment growth and leave behind a long period of very modest growth and stagnant economic conditions,” Ramos says. After all, between the first quarter of 2011 and the second quarter of 2022, average real GDP growth per capita was zero (-0.01%), and real investment spending is still 10.7% below its level in mid-2013, according to Ramos. [Read the full Q&A on the near-term outlook for Brazil under the new Lula administration.]( --------------------------------------------------------------- Innovation across software, computers and robots is rapid. Can we keep up? From self-driving cars to artificial intelligence and people-sized-and-shaped robots, technology — and the investment in it — is advancing quickly. Experts from Goldman Sachs share insights on three areas of technological change that could profoundly affect the way we work and travel: - Humanoid robots might be here sooner than you think. [A $6 billion market of humanlike robots is achievable in the next 10-15 years, according to GS Research](. Such a market would be able to fill 4% of the projected U.S. manufacturing labor shortage by 2030 and 2% of global elderly care demand by 2035. There are obstacles that must be overcome first. Battery life and production costs need to improve, and while some robots have mastered agility and other intellectual challenges, none can do both. - Software advancement could transform auto industry profits[. GS Research estimates that cars with Level 3 (a strong level of autonomous control) or more advanced technologies will account for about 15% of sales in 2030]( up from 0% in 2020. Most of those will be semi-automated vehicles that can control safety-critical functions but prompt the driver to take over in certain circumstances. And a side note: The average lines of software code per vehicle doubled from 100 million in 2015 to 200 million in 2020, driven by wider adoption of electrified vehicle control and autonomous driving. By comparison: A typical smartphone operating system or a fighter aircraft relies on around 20-40 million lines of code. - The future of coding could be conversation. For decades, people have been adapting to machines by typing code on a keyboard. [But in the coming years computers will be the ones getting used to us, according to experts who came together last month at Goldman Sachs' Private Innovative Company Conference](. Developments in language understanding mean everyone from scientists to business professionals can increasingly use AI tools without learning coding languages, says Vijay Saraswat, head of artificial intelligence research and development at Goldman Sachs. --------------------------------------------------------------- Checking in with the US consumer Above (L to R): David Mericle, Eric Sheridan and Kate McShane of Goldman Sachs. [Consumer spending has been a bright spot in the U.S. economy](. But as the holiday shopping season kicks off against a backdrop of record-high inflation and slowing economic growth, will it remain so? “It's been a very mixed bag on the consumer side,” says Kate McShane, who covers the U.S. retail sector for Goldman Sachs Research, on a recent episode of [Exchanges at Goldman Sachs](. “You're still seeing a lot of strength in certain categories. Where we've seen more of a pullback are bigger-ticket items and more one-time purchase items.” Consumer spending has slowed but that's not necessarily a bad thing — at least from the Fed's perspective. “In this context, where the Fed is trying to keep demand growth below potential so that we can solve this inflation problem, that's exactly what you want,” David Mericle, GS Research's chief U.S. economist, tells Exchanges host Allison Nathan. Meanwhile, e-commerce's soaring growth rates are returning to pre-pandemic levels, says Eric Sheridan, who covers the U.S. internet sector for GS Research. “The main theme that cuts through all the answers so far is the word ‘normalization.' We had an enormous pull-forward effect from the pandemic." --------------------------------------------------------------- Analysts vie for $250,000 nonprofit grant Our annual [Goldman Sachs Gives Analyst Impact Fund]( had more than 1,000 of the firm's analysts compete for a grant for a nonprofit of their choice. This year, a team in Singapore won $250,000 for a charity which leverages open-source healthcare technology to support hard-to-reach populations. Above (L to R): Keith Looi, Angela Lois Iskandar and Nikunj Jhanwar of Goldman Sachs. “I want to thank the more than 1,100 analysts who participated in this year's competition and developed innovative proposals in support of more than 350 nonprofits that are focused on tackling some of the most pressing issues impacting communities around the world,” our CEO David Solomon said. Here's a breakdown of our finalists and the grants they won: - First place🏅: Intelehealth - $250,000 - Second place🏅: Witness - $100,000 - Third place🏅: Upwardly Global - $75,000 (+ $25,000 Fan Favorite Grant) - Fourth place 🏅: Climate Science - $25,000  [Learn more about the nonprofits and teams of analysts supporting them.]( --------------------------------------------------------------- Cybersecurity entrepreneurs don't have it easy — just ask George Kurtz Our [Builders and Innovators Summit showcases exceptional entrepreneurs and their ideas](. For example: George Kurtz, co-founder and CEO of CrowdStrike, a leading cybersecurity company that provides services for high-profile U.S. companies, banks and energy and healthcare providers. Kurtz started out as an accountant but left to innovate in something entirely new. “Security was really new,”[ he says in a recent episode of Talks at Goldman Sachs.]( “The worldwide web was really new...People weren't protected. And I thought there was a good opportunity in security.” Above (L to R)  Goldman Sachs' Ryan Limaye and George Kurtz of CrowdStrike. The security landscape is full of complexities and nefarious actors. “It's a rough zip code out there,” Kurtz says. He outlines three types of threats: - Nation states – State actors that are usually focused on gathering information, but will disrupt things if they need to. - E-crime – Groups that often make their living by stealing and releasing data, and extorting organizations. - Hacktivisim – Individuals who use computer-based techniques, such as hacking, for political or socially motivated purposes. “Given what we've seen in the geopolitical environment…there's a lot of hacktivism going on,” Kurts says. --------------------------------------------------------------- BRIEFINGS brainteaser: The rise of robots The arrival of humanlike robots in our lives has been imagined for some time, but according to GS Research, when might humanoid robots be economically viable in factory settings? A) 2025-2028 B) 2030-2033 C) 2040-2043 D) Never [Check the answer here.]( --------------------------------------------------------------- ICYMI: In the media [CNBC]( November 14 [Europe still faces a structural energy problem, says Goldman Sachs' Jeff Currie]( (04:48) [BloombergÂ]( 11 [A top Goldman tech banker speaks to global risks (09:00)Â]( [CNBC]( November 10 [Goldman Sachs CEO says he expects a ‘reopening' in capital markets next year Â]( --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. 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