Atlanta Fed GDPNow tracker at 5.0% for Q3

The Atlanta Fed’s GDPNow tacker is already showing some pretty robust numbers for Q3 GDP growth. After an initial read of 4.7% yesterday, the tracker was updated today to 5.0%. Consensus estimates for Q3 growth are around 2.9%.

GDPNow 2018-08-01

Source: Atlanta Fed

The update puts consumer spending growth and private fixed investment growth up from 3.1% and 5.2% respectively, to 3.4% and 5.8%. Data from this morning’s construction spending report and the Manufacturing ISM Report precipitated the change in the tracker.

It’s still very early days though, as we are just one month through the third quarter. But after a 4.1% rise in quarterly GDP growth in the second quarter, any number above 3% will be seen as a marked acceleration in growth.

The double-edged sword is the Fed’s reaction function, of course. We are already on track for two more rate hikes in 2018, with a 66% likelihood now embedded in futures markets for a December rate hike, according to the CME’s FedWatch Tool. If growth and inflation pick up in the second half of the year, expect the market to move forward expectations for 2019 rate hikes as well.

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