US GDP Nowcast For Q3 Revised Up To Strong 3.9% Growth Rate

The recession warnings from some economists that attracted attention in the summer look especially misguided after today’s revised nowcast for next week’s release (October 30) of third-quarter GDP data from the Bureau of Economic Analysis. TMC Research’s model is now estimating output rose by a strong 3.9% (seasonally adjusted annual rate). If correct, the nowcast reflects a sharp acceleration in growth after Q2’s 3.0% rise.

Today’s update also marks a dramatic improvement from our previous update on September 5 (“US Q3 GDP Nowcast Indicates Slower But Still Solid Growth”), when TMC’s model estimated Q3 GDP rising 2.2%.

Every forecast should be viewed cautiously (particularly for expecting a specific data point), but today’s revised nowcast asserts: 1) recession risk was low/nil in Q3 and 2) growth will be in line with Q2’s robust pace if not exceed it. In the context of the current GDP estimate, it would be surprising to us if either one of those assumptions is proven wrong by a wide margin.

TMC Research’s GDP nowcast is generated with the following data sets:·

• US consumer price index (inflation)

• Effective Fed funds rate

• Unemployment rate

• Personal consumption expenditures

• Industrial production

• Non-farm private payrolls

• Manufacturing and trade industries sales

• Personal income

• Net exports

• Gross private domestic investment

• Government expenditures