Next month’s preliminary estimate of US economic activity for the second quarter remains on track to deliver another round of accelerated growth, based on a set of recent nowcasts.
US gross domestic product is projected to rise 9.3% (real annual rate) in Q2 via the median nowcast for several estimates compiled by CapitalSpectator.com. This estimate is well above Q1’s solid 6.4% gain via the Bureau of Economic Analysis.
All forecasts should be viewed cautiously, of course, but the fact that the median Q2 nowcast has been relatively steady in recent history is encouraging. For example, today’s revised estimate is up slightly from the 9.0% nowcast published earlier in June. The combination of stable and elevated Q2 estimates, this late in the target quarter, offers a degree of confidence that next month’s report from the Bureau of Economic Analysis will deliver upbeat news.
A similar outlook is echoed in yesterday’s June update of the US Composite Output Index, a monthly proxy for GDP. The latest survey-based estimate of ecnomic activity points to “further impressive growth of the US economy in June, rounding off an unprecedented growth spurt over the second quarter as a whole,” says Chris Williamson, chief business economist at IHS Markit, which publishes the data.
Anecdotal reports from around the world also paint a rosy picture of the current macro profile for the US. “We’re incredibly bullish about the US economy, even more so now,” says Mark Vassella, chief executive of BlueScope Steel Ltd., an Australian steel company focused on raising output to satisfy rebounding orders from US companies.
Some economists are eyeing the potential for weaker readings later in the year as various risks revive in the wake of fading government stimulus payments. Doug Roberts at Channel Capital Research, for example, says the aftermath of “economic sugar high” could be rocky because of firmer headwinds for the consumer sector. But this risk could be partly offset by new infrastructure spending, which reportedly is showing signs of life again after reports of progress in negotiations between the White House and a bipartisan group of Senators.
Nonetheless, it appears that Q2 growth will mark the high point in US economic activity relatively to the foreseeable future and so deceleration in output is the likely path ahead. But deceleration from an unusually high rate of expansion is still bullish.
The bigger challenge is keeping the recovery bubbling for an extended period. The good news is that macro momentum for the immediate future is expected to remain strong, which provides a solid foundation for extending the expansion well into the future.
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