We could have even higher third quarter economic growth, believe it or not, from the second quarter 2.4 percent (advance) growth estimate by the US Bureau of Economic Analysis.
The Atlanta Federal Reserve’s GDPNow model estimates a jump to 3.9 percent growth in Q3 (September to December 2023), a huge leap from its second quarter estimate that actually matched the BEA’s Q2 estimate. So, we should take it seriously, given all the good news about public spending on new infrastructure.
“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 3.9 percent on August 1, up from 3.5 percent on July 28. After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 3.1 percent and 4.7 percent, respectively, to 3.5 percent and 5.2 percent.”
Construction is surging because of the US Infrastructure Act and Inflation Reduction Act $trillions being spent to modernize the US economy.
As if to emphasize the increased optimism, orders at U.S. factories rose 2.3 percent in June, largely because of more contracts for Boeing planes. Bookings for durable goods climbed 4.6 percent that are mostly consumer goods meant to last at least several years. The overall manufacturing sector is still weak and future orders have been contracting for almost one year.
How can the Atlanta Fed be so optimistic about future growth when Fitch Ratings just downgraded US Sovereign Debt to AA+ from AAA?
Much of it may have something to do with the various programs congress enacted, now being called Bidenomics, because though bipartisan it happened under President Biden’s watch.
Major economists like Nobel Laureate Paul Krugman are jumping on the Bidenomics growth bandwagon.
“It’s hard to overstate how good the U.S. economic news has been lately. It was so good that it didn’t just raise hopes for the future; it led to widespread rethinking of the past. Basically, Bidenomics, widely reviled and ridiculed a year ago, looks a lot better in retrospect. It’s starting to look as if the administration got it mostly right, after all.”
Second quarter consumer spending (i.e., personal consumption expenditures) has held up, though down from its first quarter spike. And real gross private investment is increasing 5 percent annually, thanks to those $trillions government is spending to stimulate private investments that is modernizing almost every area of our economy, from roads and bridges, water treatment facilities, airports, energy grids, to rural Internet hookups.
And a higher percentage of Americans are working than before the pandemic, so why shouldn’t the US economy look even better in Q3?
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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