A sluggish start to economic growth this year in the midst of an interest rate tightening cycle gets interesting as Friday’s third quarter preliminary GDP report is expected to shed light on the economic performance in the US.
The broad consensus being that the US economy managed to gather pace in the third quarter, with the median estimates pointing to a 2.5% growth. This follows a 1.4% increase seen in the second quarter and about 1.1% for the first half of the year.
A rebound in the third quarter would no doubt cement the prospects for another rate hike in December. US consumer confidence soared to a 9-month high in September alongside a steady jobs market which is underpinning hopes that the US economy will see a +2% GDP growth during the quarter. According to latest reports released earlier this week, consumer confidence was seen moderating as the index fell to 98.6 in October from 103.5 in September. The data was however seen as pre-election jitters as the broader outlook points to a moderate pace of improvement.
Despite a slowdown in US consumer spending during the quarter, GDP growth is expected to increase, largely thanks to stronger auto sales as well as trade and inventory which are expected to boost growth during the reported period. Experts believe that policymakers will, therefore, be looking to the final demand which is expected to be good enough to underpin hopes for a rate hike in December. Retail sales including online retailers and restaurants rose 0.6% in September and stood at 2.7% on a year over year basis according to official reports earlier this month.
NY & Atlanta Fed give subdued economic forecasts
As of last Friday, the New York Federal Reserve Bank which publishes its own forecasts or GDP tracker, NowCast model projected a GDP growth in the third quarter to 2.22%, slightly down from 2.30% just a week before. The NowCast model also forecasts a fourth-quarter growth could slow to 1.40% as of Friday, October 21st. The NowCast model gave a downbeat view on GDP growth on account of weaker than expected housing data and the regional manufacturing surveys for the third quarter.
