Is A Slowdown Brewing For U.S. GDP Growth In Q4?
James Picerno | Nov 29, 2016 07:17AM ET
The rebound in US economic growth in the third quarter is looking vulnerable in Q4, according to recent estimates from several sources. If the projections are accurate, the 2.9% pace in Q3 (the highest rate in two years) is headed towards 2.0%. That’s still an improvement over the sluggish pace in the previous three quarters (Q4:2015 through Q2:2016), but the latest estimates for Q4 point to a softer macro trend in this year’s final three months.
The average Q4 prediction in The Wall Street Journal’s October survey of economists is 2.1%, well below Q3’s 2.9% advance (all GDP changes quoted as real seasonally adjusted annual rates). The forecast, if accurate, will deliver the second-fastest quarterly increase in more than two years. Nonetheless, economists have turned relatively cautious in recent weeks.
The Atlanta Fed’s GDPNow model is an exception, based on the November 23 estimate. The Fed bank’s nowcast is looking for a 3.6% increase in Q4 GDP—a solid improvement over Q3’s 2.9%. But that rosy outlook is an outlier at the moment. Softer estimates from other sources suggest that the Fed bank will trim its nowcast in tomorrow’s update (Nov. 30) that follows the release of personal income and spending data for October.
The Trump-election factor, however, continues to convince some analysts that any Q4 slowdown will be temporary. The OECD’s new economic forecast, for instance, sees firmer growth next year for the US and the global economy. “In the aftermath of the US elections, there is widespread expectation of a significant change in direction for macroeconomic policy,” the Paris-based Organization for Economic Cooperation and Development advised yesterday. The outlook for new a stimulus program is on track to “raise calendar year US GDP growth by around 0.4 percentage points in 2017 and a little over 0.8 percentage points in 2018,” the organization advised.
Anatole Kaletsky, chief economist at Gavekal Dragonomics, also subscribes to a relatively upbeat outlook in the wake of Trump’s election. Writing in The Guardian yesterday, he predicts that US growth “will almost surely accelerate above the 2.2% average annual rate during Barack Obama’s second term. This is because the Republican aversion to public spending and debt applies only when a Democrat like Obama occupies the White House.” He reasons that:
Get The News You Want
Read market moving news with a personalized feed of stocks you care about.Get The AppWith a Republican president, the party has always been glad to boost public spending and relax debt limits, as it was under Presidents Ronald Reagan and George W Bush. Thus, Trump will be able to implement the Keynesian fiscal stimulus that Obama often proposed but was unable to deliver.
Today’s revised GDP numbers for Q3 GDP are expected provide a degree of support for thinking positively. Econoday.com’s consensus forecast calls for a slightly faster growth rate of 3.1% vs. the 2.9% pace in the previous estimate for Q3.
The question is whether Q4 will provide any comfort for an upbeat forecast in 2017? At the moment, there’s a bit more skepticism that the Q3 rebound has legs.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.