The US economy is still expected to post a slower growth rate in the upcoming fourth-quarter GDP report. But in a sign of confidence that a respectable expansion persists, the projected rate of expansion picked up in today’s nowcast vs. the previous estimate.
Output will increase by 2.4%, according to the median for several nowcasts compiled by CapitalSpectator.com. If correct, growth will ease below Q3’s strong 3.1% advance.
Today’s revised 2.4% nowcast marks a modestly higher estimate vs. last week’s update, which estimated Q4 growth a 2.1%.
Although the economy’s expansion has been downshifted recently, the softer pace still reflects a healthy pace. The slower rate probably reflects a normalization process as the US economy transitions from higher volatility in GDP changes linked to the pandemic effects.
While the US GDP looks set to close out 2024 with a solid growth rate for Q4, the year ahead carries new uncertainties from the incoming Trump administration, which plans to change policies on several fronts.
“Success for the Trump administration would be to do no harm to the exceptionally performing economy it is inheriting,” says Mark Zandi, chief economist at Moody’s Analytics. He advises that plans for new tariffs, deportations, and deficit-funded tax cuts “will do harm. How much depends on how aggressively these policies are pursued.”
More immediately, there are growing concerns that sticky inflation will pause, or perhaps at some point reverse, the Federal Reserve’s plans for interest rate cuts. A new clue is set to arrive tomorrow (Wed., Jan. 15) via the December report on consumer inflation.
Economists are expecting mixed results, according to Econoday.com’s consensus forecast. Headline CPI is expected to edge higher again for a third month for the year-over-year comparison, rising to 2.9%. Core CPI, on the other hand is estimated to hold steady at 3.3%. The Fed’s 2% inflation target, in other words, remains elusive.
Fed funds futures are pricing in a near certainty that the central bank will leave its current 4.25%-4.50% target rate unchanged at the Jan. 29 policy meeting. For the March 19 meeting, the probability for no change is a relatively high 80% probability via this morning’s data.
“Investors should not count on further significant slowing in inflation,” predicts Steven Wieting, chief economist and investment strategist at Citi Wealth.