Median US Q2 GDP Growth Estimate Continues To Hold At 2.0%

Projected US economic output for the second quarter is holding steady at 2.0%, based on the median for a set of nowcasts compiled by The Capital Spectator. The estimate reflects a slowdown from Q1’s 3.1% gain, but the softer increase in expected economic activity for the current quarter appears to have stabilized. Today’s median nowcast is unchanged from the moderate 2.0% estimate published two weeks ago.

Incoming data in the weeks ahead could still alter the outlook for the government’s preliminary Q2 GDP report, which is scheduled for July 26. Based on numbers published to date, however, there’s a reasonable case for expecting that Q2’s deceleration from Q1 will be modest. If the median nowcast (via the estimates in the chart below) remains more or less stable through July, the US macro trend will probably stay positive. And if the economy grows through next month, the current expansion will become the longest on record — 121 months, according to NBER.

Recession risk is still low, but “the economy feels more fragile than anticipated,” observes Mark Zandi, chief economist at Moody’s Analytics. “The problem is President Donald Trump’s trade war. While the tariffs the president has actually imposed have been modest — 25% on $250 billion in Chinese imports to the US and some steel and aluminum imports — his threats are anything but. Currently, in play are 25% on the remaining $300 billion in Chinese imports and about $275 billion in vehicle imports.”

Trade-war risk could be a game-changer, veteran trader Art Cashin told CNBC last week, advising that the US economy could be headed for a “borderline recession.”

June survey data for the US Composite Output Index echoes Cashin’s view. This business cycle benchmark slipped to a 40-month low, settling at 50.6 – just slightly above the neutral 50 mark that separates growth from contraction.

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