US GDP Preview: Forecasts from eight major banks, losing momentum in Q3

The US Bureau of Economic Analysis will release its first estimate of the annualized GDP growth for Q3 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of eight major banks, regarding the upcoming US data. Markets expect the US economy to expand by 2.5% on a yearly basis after growing by 6.7% in the second quarter. 

ING

“Supply chain strains and labour shortages held back production, and this is likely to show up in another big drag lower from inventories. Government spending may rebound a touch, while investment should be OK, given construction numbers and durable goods orders data. Net trade may be positive, but not for the best of reasons, given the disruption in Chinese output and the long queues of ships trying to get into US ports. Putting this all together, we have 3Q GDP growth pencilled in at around 2.5% annualised.”

RBC Economics

“We expect US GDP grew by 3% in Q3, slowing from the previous quarter as consumer spending momentum faded amid Delta fears and goods shortages emerged from supply constraints.”

NBF

“The pace of the recovery likely decelerated in the quarter, as rising COVID-19 caseloads and supply chain constraints weighed on the economy. Positive contributions are nonetheless expected from consumption spending, business machinery/equipment investment and, to a lesser extent, trade. Residential investment, on the other hand, might have weighed on growth. Our call is for a 2.5% annualized expansion. In other news, the latest report on personal income could show a decrease for September (-0.3%) as solid wage gains were likely offset by the phasing out of some emergency income support programs.”

Westpac

“Over the year to June 2021, the US economy experienced a strong recovery from the depths of the pandemic recession. These gains were led by the consumer as households initially reset their lifestyles to weather the pandemic and later as a wave of stimulus rolled in. In the three months to September however, the US economy looks to have stalled, with growth seen around trend – at best. For the recovery, the timing of the delta wave is extremely problematic, occurring just as consumers were looking to get out and about and spend on services. However, with cases coming down and vaccinations continuing, this slowdown should prove temporary. While we have lowered our Q3 number from 3.5% to 2.0% annualised and see material risks to the downside, our 2021 and 2022 year-average forecasts are little changed at 5.6% and 4.0%.”

SocGen

“We look for slowing to just 2.1%, versus a 6.5% average for 1H and expectations at the start of 3Q of 5% growth. What happened? First, consumption slowed. Spending on autos fell precipitously and taken by itself, auto sales look recessionary. This is widely viewed as temporary.”

CIBC

“All signs point to a deceleration in GDP growth in the US in the third quarter as consumer spending on goods was stifled by supply chain bottlenecks, and momentum in services spending faded with the spread of the Delta variant. Exports appear to have been soft relative to imports, leaving our 2.6% annualized growth forecast driven by inventories. Excluding inventories, the economy would have contracted by nearly 1% annualized. We’re slightly above the consensus forecast, which could support the greenback and see bond yields rise.”

Citibank

“US GDP Annualized QoQ – Citi: 2.4%, median: 2.6%, prior: 6.7%; Personal Consumption – Citi: 0.7%, median: 0.7%, prior: 12.0%; Core PCE QoQ – Citi: 4.4%, median: 4.4%, prior: 6.1% - Citi analysts expect Q3 to be  the softest quarter of growth in the pandemic recovery period, reflecting the now-higher level of activity, thus with less mechanical reopening upside as well as from supply constraints even if demand remains very strong.”  

TDS

“Growth appears to have slowed sharply in Q3: Our 1.8% QoQ AR estimate is down from 6.7% in Q2 and 6.3% in Q1. Growth in real consumer spending was probably barely positive. (Full details in the main forecast table below.) The Delta COVID wave, the fading of fiscal stimulus and supply constraints likely all played a role in the slowing. Delta's drag should abate soon, but the fiscal fade will continue and supply issues are unlikely to disappear quickly. We forecast a 4% pace for Q4.”