The advance estimate for Q3 GDP comes out on Thursday. In the last couple of weeks, Wall Street economists have been cranking up their forecasts, with many expecting a reading somewhere around 2.8%.
This is a big jump from Q2’s 1.0% reading, and given how many analysts were calling for a Q3 double-dip, this is a pretty big turnaround.
The lack of a collapse in spending and jobs coupled with resilient car sales explains the change in expectations.
Economists David Altig and Patrick Higgins, both at the Atlanta Fed, suggest that growth for the quarter could be as high as 3.2%.
One aspect of this analysis is called a “nowcasting” exercise that generates quarterly GDP estimates in real time. The technical details of this exercise are described here, but the idea is fairly simple. We use incoming data on 100-plus economic series to forecast 17 components of GDP for the current quarter. Those forecasts of GDP components are then aggregated to get a current-quarter estimate of overall GDP growth.
The outcomes of this exercise have been as positive in the third quarter as they were negative for the first two quarters of the year:
Perhaps “blazing-fast” is not the accurate descriptor for 3.2% growth, but again, considering the pessimism for the economy going into this quarter, this is pretty surprising.
It also explains a lot of the rise in the stock market, starting in early October.