US GDP above 3%

Yesterday we got the next reading of the GDP forecast according to the Atlanta FED model. In Q3 2024, GDP is to grow by 3.08% (after GDP growth in Q2 of 2.99%) - such growth does not indicate the risk of recession in the near future. See Figure 1 and 2.

However, spending of the American consumer turned out to be softer in August (Personal Income and Outlays report), hence the decrease in the PCE forecast for Q3 from 3.66% to 3.28% - see Figure 3.

GDP growth in Q3 of 3.08% SAAR would mean GDP growth YoY in Q3 of 2.72%. This looks interesting against the background of the last median forecast of GDP growth in Q4 2024 according to FOMC members at the level of only 2.0%. See Figure 4 and 5.

For Q4 YoY GDP to fall to 2%, we need a decline in Q4 GDP calculated as SAAR to only 0.32%! See Figure 6. From today's perspective, this is unlikely and the Fed will probably have to raise its GDP growth forecast at its meeting on December 18, 2024.

All in all, the forecast of Q3 GDP growth of +3.08% and PCE growth of +3.28% should be a good premise for the market to price in a soft landing scenario.