Fed’s Powell opens door to potential rate cuts at Jackson Hole
The latest nowcasts for US economic activity continue to point to a moderate downshift for the third quarter, based on the median for a set of estimates compiled by CapitalSpectator.com. Recession risk remains low, based on today’s update, but growth is still on track to ease substantially relative to the strong gain reported for Q2.
Q3 GDP is projected to rise 1.7% (annualized change), according to today’s median estimate. That’s well below the 3.0% increase reported for Q2. The Bureau of Economic Analysis is scheduled to publish its initial Q3 GDP data on October 30.
Today’s revised estimate is a tick higher than our initial median Q3 nowcast report, published on Aug. 11. Although it’s still early in the quarter and so there’s opportunity for incoming data to alter the nowcast, some degree of slowdown from the previous quarter is likely at this point.
Cherry-picking the latest data input suggests otherwise, based on yesterday’s August estimate of the US Composite PMI Output Index, a GDP proxy. This month’s initial reading highlights a pickup in business activity to the strongest pace so far this year. Commenting on the data, Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
A strong flash PMI reading for August adds to signs that US businesses have enjoyed a strong third quarter so far… Companies across both manufacturing and services are reporting stronger demand conditions, but are struggling to meet sales growth, causing backlogs of work to rise at a pace not seen since the pandemic-related capacity constraints recorded in early 2022.
Stock building of finished goods has also risen at a survey record pace, linked in part to worries over future supply conditions.
If the initial PMI data for August is correct, the other nowcasts for Q3 in the chart above will soon be revised higher. Meantime, it’s premature to read too much into one survey-based data point.