The Atlanta’s Fed’s GDPNow model raised the outlook for US economic growth in the third quarter to 1.5% in yesterday’s update (Sep 15). That’s still a sluggish pace, but it beats a kick in the head. Alas, it still falls short of a clear signal for raising interest rates, which is potentially on the agenda at the Fed’s policy meeting, which concludes with tomorrow’s statement and press conference.
Meantime, a question: will Yellen and company launch the first rate hike in a decade with expectations for Q3 growth bumbling along at a tepid 1.5%? Probably not, although it’s worth pointing out that the Fed’s last quarterly update is looking for relatively stronger growth in 2016. June’s central tendency forecast for US GDP next year anticipates a 2.4%-to-2.7% increase–a sizable premium over what the GDPNow model’s looking for when the Bureau of Economic Analysis publishes the “advance” Q3 GDP report on Oct. 29.
Of course, if you’re looking for an upbeat economic forecast, it pays to shop around. Last week’s Q3 GDP estimate from Wells Fargo, for instance, isn’t much higher than the GDPNow projection, although next year’s numbers also offer more traction for optimists by way of quarterly growth rates in the upper-2% range. No wonder that the bank’s economics team has a hawkish bias about tomorrow’s rate decision, arguing that “we feel the data continue to support a move.”
As for the current quarter, economists overall have a brighter outlook for Q3 relative to that pesky GDPNow model. The Wall Street Journal’s survey data for September has an average 2.4% estimate for GDP growth in the August-to-September quarter–a moderate but respectable edge over the GDPNow forecast. But wait–it gets better: The Journal’s survey anticipates that growth will accelerate to 2.8% in Q4 before ticking back down to 2.5% in next year’s first quarter.
Leave A Comment