US economic activity is still expected to post a rebound in the upcoming third-quarter report, but the projected bounced has faded to a crawl, based on the median estimate for a set of nowcasts compiled by CapitalSpectator.com.
The revised median points to a weak 0.6% increase for Q3 GDP, based on the seasonally adjusted annual rate. If correct, the estimate will mark the first positive quarterly economic report for the US in 2022. The Bureau of Economic Analysis is scheduled to publish Q3 data on Oct. 27.
GDP Chart
The 0.6% median nowcast reflects a sharp downgrade from the previous estimate on Sep. 7, when the median indicated a much stronger 2.0% increase.
Among the headwinds for the US economic outlook: ongoing interest-rate increase by the Federal Reserve to tame inflation. Some economists wonder if the central bank’s policy tightening is now too stringent amid signs that pricing pressure has peaked.
“The current economic situation is full of uncertainty, and any policy decision involves making trade-offs among various risks,” writes economist Paul Krugman.
“What we can say is that the risk that the Fed is moving too slowly to contain inflation has declined, while the risk that high interest rates will cause severe economic damage has gone up — a lot.”
Right or wrong, the rate hikes will take a toll. “We’re going to see significant slowing of the US economy, particularly in interest-rate-sensitive sectors,” including housing and business investments, predicts Abbey Omodunbi, senior economist at PNC, a bank.
Although the economy is slowing, the risk of recession still appears low for the immediate future, based on a broad set of indicators reflected in the New York Fed’s Weekly Economic Index. This multi-factor benchmark of economic activity has been trending lower since the summer, but for the moment it continues to indicate a bias for growth, based on data through Sep. 17.
