The US economy appears to be gaining momentum in the third quarter, with Q3 GDP nowcasts tracking at a 2.4% annualized increase based on the median of multiple estimates compiled by The Capital Spectator. This represents an acceleration from Q2's modest 1.5% increase, with the government's official data scheduled for release on October 29. According to reports from Investing.com India, the median nowcast has ticked up from the previous 2.3% estimate on August 24, indicating strengthening economic activity expectations.
Multiple economic indicators support the acceleration thesis. The Atlanta Fed's GDPNow model is nowcasting a sizzling 4.7% increase as of September 3, though this appears high relative to the median. As reported by Investing.com India, the Dallas Fed's Weekly Economic Index (WEI) has rebounded and is currently projecting 3.1% year-over-year GDP growth, marking a strong improvement over Q2's 2.1% rise. Last week's PMI survey data aligns with the upbeat Q3 estimate, with S&P Global Market Intelligence noting that business activity growth across the private sector accelerated in August, marking a clear shift in economic gear.
The labor market is showing robust signs of growth, with non-farm payrolls rising 162,000 last month, far above the 55,000 consensus forecast and representing the strongest monthly increase since March. According to Investing.com India, while the rebound is less dramatic for the private sector, hiring momentum among companies remains solid. This labor market strength provides additional support for the broader economic acceleration narrative.
Despite the positive economic indicators, several risk factors are building that could challenge the momentum. As reported by Investing.com India, these include rising US Treasury yields, ongoing inflation anxiety, continuing hostilities with Iran, elevated energy prices, increasing trade-war risk including renewed tensions with Canada, AI fatigue as Wall Street shifts from growth narrative to mounting capital costs, and growing US fiscal vulnerability as widening deficits, rising interest costs, and deteriorating debt profile threaten to become a macro drag.
The combination of these risk factors creates potential headwinds that could slow or reverse the economic momentum appearing in Q3. However, as noted by Investing.com India, some hazards could fade, such as a durable peace deal with Iran that would ease energy price and inflation pressure. The bond market could also rally if Congress and the White House address the deteriorating fiscal profile, while AI optimists may be right that the technology will deliver productivity gains supporting Treasury Secretary Bessent's view that 'we can grow our way out of that' amid news that the US national debt has topped $40 trillion for the first time.
