Economic sentiment among the American public has waned in the face of rising inflation, the most aggressive interest rate tightening cycle since the early 2000s, and plenty of uncertainty in the political realm. However, a recent Nowcast from the Atlanta Federal Reserve GDPNow suggests that the annualized real GDP growth could come in at over 5%. Professional economists had already predicted 3% annualized GDP growth that followed a slew of upward revisions.
Investors needed some good news after a slow start to the fall season. If the estimate holds, then the third quarter (Q3) should be a nice bounce back after consecutive quarters of positive but mediocre growth. The Atlanta Fed also indicates that these estimates will also be underpinned by strong growth in consumer spending. That would be a solid rebound after soft growth in Q2.
This news is important to consider as the U.S. Federal Reserve prepares to hold a meeting to deliver its verdict on an interest rate hike or hold on Wednesday, November 1. Robust growth is typically good news, but it also means that there will be additional pressure to potentially raise interest rates.
In recent weeks, some Federal Reserve members have stated that they will remain committed to their “restrictive” monetary policy until they reach their inflation target. The central bank has set an inflation target of 2%. In September 2023, U.S. inflation stood at 3.7% year over year. That was higher than some experts had predicted.
