Daily Spotlight: Trimming 3Q GDP Growth Forecast

Summary

We are reducing our third quarter 2024 forecast for GDP growth to 1.5% from 1.6%. We are reducing our 4Q estimate to 1.7% from 1.9%. We see a U.S. economy that is growing, but may be losing momentum based on our analysis of more than 50 business cycle indicators. Our forecast has been for GDP growth to slow in the in the second half of 2025 as a result of restrictive monetary policy. We continue to expect the Fed to cut the funds rate in 2024, leading to a reacceleration of growth in the second half of 2025. We are raising our estimate of full-year 2024 GDP growth to 1.9% from 1.7% because 2.8% growth in 2Q topped our estimate of 1.8%. Business investment was stronger than we anticipated in 2Q, helped by spending on equipment and intellectual property offset by a decline in residential investment. Four indicators driven by very timely data support our belief the economy is not in a recession but may be losing steam. On August 8, the Federal Reserve Bank of Atlanta’s GDP Nowcast was estimating solid 3Q growth of 2.9%. On August 2, the New York Fed’s Staff Nowcast for 3Q was for 2.1% growth, with a 68% probability range of 0.33% to 3.69% growth. The Weekly Economic Index tracked by the Dallas Fed is based on 10 daily and weekly indicators that track 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 end