First-quarter growth posted a strong improvement over the previous quarter and a repeat performance is expected for the second-quarter report on gross domestic product (GDP) that’s scheduled for release in late-July.

US output is projected to rise a red-hot 9.9% in Q2 (real annual rate), based on the median nowcast for several estimates compiled by CapitalSpectator.com. The nowcast represents a dramatic upgrade over the already strong 6.4% gain reported for Q1.

The current median nowcast is slightly below the estimate from earlier this month, but it’s fair to say that the Q2 outlook remains unusually bullish. If the 9.9% advance proves to be accurate, the gain would be the biggest quarterly increase in GDP in more than 40 years (ignoring the off-the-charts 33% surge in 2020’s Q3 due to the one-time bounce-back effect from the depths of the pandemic).

Despite the continued outlook for a roughly 10% gain in GDP in the April-through-June period, it’s reasonable to assume that the median estimate will slide in the weeks ahead as new Q2 data is published. Although there’s still a solid case for expecting strong growth in the current quarter, recent economic reports suggest that the economy’s forward momentum isn’t as strong as previously thought.

US retail sales in April, for example, were much weaker than expected, remaining flat vs. the previous month. Economists were expected a strong 1% increase. An even bigger downside miss was posted for nonfarm payrolls in April, which rose 266,000 – far below the consensus forecast for a near-1 million gain.

Economic noise is unusually high these days and so all incoming data should be view cautiously until the lingering effects of the pandemic wash out of the data. Despite the rise in volatility for macro indicators recently, expectations for Q2 remain upbeat.

Estimates for economic activity at the Federal Reserve are certainly bullish, based on yesterday’s release of minutes for April. The central bank reported that “The US economic projection prepared by the staff for the April FOMC meeting was slightly stronger than the March forecast.”

Nonetheless, the higher-than-usual volatility in economic results vs. expectations in recent weeks is a hint for managing expectations down for Q2 GDP expectations. The good news is that the median Q2 nowcast, at roughly 10%, is still high enough so that even a substantial downgrade would still leave plenty of room for projecting a solid improvement in growth over Q1.