U.S Economy: Q3 Growth Forecast

pedestrians

Every single investment bank, Hedge Fund, large-cap, or Multinational Corporation hires analysts and spends time and money for the sake of having an understandable image and forecast for the future.

Having an idea of where we are in the business cycle and where we are heading towards is a crucial step for decision-making.

On which phase of the economic cycle we do stand right now, what is the next step, is it up or down, is it a recovery, expansion, or a decline, how the second-quarter GDP data will look like, and what about the third Quarter 2021.

In this article, we try to answer some of those questions, by looking at major economic activity components, indicators, and surveys.

Growth outlook through Leading economic surveys

PMIs

Purchasing managers index tend to have strong predictive power and it is highly correlated to GDP with 4 to 6 months lead.

The ISM manufacturing and non-manufacturing PMIs are signaling continuous expansion of the business activity, although the manufacturing PMI starts retracing back from march-21 64.7 peak, it still indicate expansion above 50.

ism non manufacturing pmi

ism manufacturing pmi

Digging a bit deeper into the ism manufacturing PMI indicator components we notice a kind of stagnation at a high level since Q-4 2020, forming a range and in recent months most of those indicators are playing at the bottom of that range, this means stable continuous improvement in the economic activity but at a slower pace than what was seen in the first half of this year. hence lower GDP annual growth rate for the third quarter.

ism manufacturing pmi components

U.S. CONSUMER CONFIDENCE

Personal consumption by U.S households represents about 70% of the U.S GDP.

Vaccine rollout, stimulus checks, and recent easing in restrictive measures help ease U.S citizens' concerns.

The University of Michigan Consumer Sentiment Index -UMCSI is progressing in an upward trend since the april-2020 bottom, but it is still far bellow pre-pandemic levels. however, the upward slope in UMCSI 3 months moving average indicates continuous improvement in U.S households sentiment and consumption.

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Disclaimer: Opinions expressed in our article are based on current market conditions and are subject to change without notice. These opinions are not intended to predict or guarantee the ...

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