Daily Spotlight

Raising 3Q GDP Growth Forecast

We are raising our third-quarter 2024 forecast for GDP growth to 3.0% from 1.6%. The most-significant changes to our model are increases in our estimates for the big services category and increases to investments in both equipment and intellectual property. We still expect 3Q core PCE inflation of 2.2%. Our research points to a U.S. economy that is healthy and growing. Recent positive surprises came from three sources: the Fed's 50-basis-point rate cut; the ISM Services Index, which helps in forecasting about 45% of GDP; and September nonfarm payrolls. GDP growth of 3% in 2Q, based on the final revision, also dispels any lingering recession fears. We are raising our 4Q24 GDP growth estimate to 2.3% from 1.7% and lifting our full-year 2024 GDP estimate to 2.5% from 1.9%. These forecasts do not include adjustments for hurricanes. We still expect 2% growth in 2025, with quarterly estimates of 1.3%, 2.0%, 2.3%, and 2.5%. Four indicators driven by broad and timely data support our assessment that the economy is growing at a healthy pace. On October 9, the Federal Reserve Bank of Atlanta's GDP Nowcast was estimating 3Q growth of 3.2%. On October 4, the New York Fed's Staff Nowcast for 3Q was for 3.1% growth, and the 4Q Nowcast was 2.8%. The Weekly Economic Index tracked by the Dallas Fed is based on 10 daily and weekly indicators of consumer behavior, the labor market, and production. If, for example, an index value of 2% persisted for an entire quarter, the index would suggest that quarter's GDP would be 2% higher than a year ago. For the week ended September 28, the index was 2.04%, with a 13-week moving average of 2.06%. The Chicago Fed National Activity Index looks at 85 indicators. It rose to 0.12 in August from -0.42 in July. The three-month moving average was little changed at -0.17. The Diffusion Index decreased to -0.23 in August from -0.11 in July. These readings suggest the economy is growing slightly below average, but not contracting....  about 45% of GDP; and September nonfarm payrolls. GDP growth of 3% in 2Q, based on the final revision, also dispels any lingering recession fears. We are raising our 4Q24 GDP growth estimate to 2.3% from 1.7% and lifting our full-year 2024 GDP estimate to 2.5% from 1.9%. These forecasts do not include adjustments for hurricanes. We still expect 2% growth in 2025, with quarterly estimates of 1.3%, 2.0%, 2.3%, and 2.5%. Four indicators driven by broad and timely data support our assessment that the economy is growing at a healthy pace. On October 9, the Federal Reserve Bank of Atlanta's GDP Nowcast was estimating 3Q growth of 3.2%. On October 4, the New York Fed's Staff Nowcast for 3Q was for 3.1% growth, and the 4Q Nowcast was 2.8%. The Weekly Economic Index tracked by the Dallas Fed is based on 10 daily and weekly indicators of consumer behavior, the labor market, and production. If, for example, an index value of 2% persisted for an entire quarter, the index would suggest that quarter's GDP would be 2% higher than a year ago. For the week ended September 28, the index was 2.04%, with a 13-week moving average of 2.06%. The Chicago Fed National Activity Index looks at 85 indicators. It rose to 0.12 in August from -0.42 in July. The three-month moving average was little changed at -0.17. The Diffusion Index decreased to -0.23 in August from -0.11 in July. These readings suggest the economy is growing slightly below average, but not contracting.  more

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