US Q3 GDP Estimates Continue To Indicate Solid Growth

The resurgence in coronavirus cases, hospitalizations and fatalities in the US hasn’t taken a bite out of third-quarter growth estimates, at least not yet.

Revised data continue to show Q3 nowcasts remain on track to post a strong gain, based on the median nowcast for several estimates compiled by Output is projected to increase 5.1% for the July-through-September period — unchanged from the median estimate published two weeks ago.

A 5%-plus expansion is robust, but the coronavirus poses a risk to growth in the months ahead and so the potential for downgrades are lurking by the time the Bureau of Economic Analysis publishes the first Q3 GDP estimate in late-October.

Meantime, no threat is on the immediate horizon from monetary policy, which is likely to remain extremely dovish. Higher inflation is a counterforce that may trigger tighter-than-expected policy earlier than forecast. But Federal Reserve Chairman Jerome Powell last week downplayed that scenario. “We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2% inflation [target] on a sustainable basis,” he said.

The rebound in the pandemic blowback will likely keep any policy changes by the central bank on hold until the situation stabilizes.

“The real question is how well spending will hold up against the current delta wave,” advises Leslie Preston, senior economist at TD Economics. “Some high-frequency indicators are pointing to a loss in momentum in spending as consumer caution creeps in.”

A key update for managing economic expectations is due on Friday (Sep. 3) with the release of payrolls data for August. Economists are looking for a conspicuous slowdown in jobs growth to 740,000, according to’s consensus point forecast. That’s well below the 943,000 gain in the previous month. Nonetheless, a 700,000-plus increase would still signal that the the economy’s expansion. By contrast, a substantially weaker-than-expected gain would be read as a worrisome sign that pandemic blowback is strengthening and the current Q3 GDP outlook is vulnerable to downgrades.

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