Traders work on the floor of the New York Stock Exchange (NYSE) in New York, United States, Friday, October 20. … [+]
The Q3 advance estimate Gross domestic product growth for the US economy will be announced at 8:30 a.m. ET on October 26. GDPNow from the Atlanta Federal Reserve suggest that annualized real GDP growth could exceed 5% and professional economists are forecasting growth exceeding 3% after a trend of upward revisions in recent weeks. Even if the forecast of 3% is confirmed, this would still represent an impressive growth rate for the American economy compared to recent quarters.
The October 26 GDP figure will be the first of three increasingly precise estimates of third-quarter GDP growth from the Bureau of Economic Analysis, with a revised estimate coming on November 29 and December 21. Subsequent revisions may adjust the advance estimate of GDP growth by half a percent. up or down, on average.
Acceleration of growth
If estimates are confirmed, the third quarter will mark an acceleration in annual real GDP growth, compared to growth of more than 2% in the previous four quarters. Before that, the first half of 2022 saw a decline in GDP.
If the robust third-quarter growth continues, the Atlanta Fed’s Nowcast suggests it will be supported by strong growth in consumer spending, rebounding from relatively weak growth in the second quarter. Significant contributions can also come from net exports, which can be volatile from quarter to quarter, as well as reasonable growth in private stocks.
The Fed’s reaction
Given that robust growth is generally expected in the third quarter, the third quarter GDP numbers are not expected to significantly change the outlook of the Fed or the markets. It is highly likely that interest rates will remain stable at the Fed’s next short-term rate decision on November 1. However, a further increase in rates was not subsequently ruled out by policy makers.
For now, the Fed’s main goal is to curb inflation. So if growth gets too strong, that could actually be a concern for the Fed. Indeed, rapid growth, as a signal of strong demand, can ultimately put upward pressure on prices.
The Fed actually hopes that economic growth will slow somewhat, or it may decide to raise interest rates again in the coming months to help bring inflation closer to its 2% target. However, the Fed is also hoping for a “soft landing” for the US economy and, in this sense, sustained growth is welcome.
The main question facing markets now is what growth will look like in 2024. The inverted yield curve suggests that a recession is likely in 2024. That said, so far, current economic data, as l employment, continued to hold up better than expected. This is especially true after September’s strong jobs data. This offset the apparent weakness in employment in July and August.
Other concerns
Despite likely good growth news, markets continue to closely monitor events in the Middle East, which have continued to put upward pressure on energy prices in recent weeks. This comes against a backdrop of a general rise in oil prices since June.
Additionally, political concerns in Washington could weigh on the continued process of electing the Speaker of the House. Another government shutdown deadline is approaching in mid-November, although, as before, a bipartisan solution could be found.
The main question, however, remains how the economy will perform in 2024. So far, the sharp rise in interest rates has not led to the slowdown in economic growth that has occurred in many cycles. past interest rates.
It remains to be seen whether this time will be different or whether we will see a greater impact on growth in 2024. There is now additional risk as long-term interest rates have risen relatively steadily since May 2023 , strengthening and extending the Fed’s monetary policy. measures to raise short-term rates.