Early U.S. third-quarter estimates point to a slowdown compared to the second quarter, based on the median of nowcast estimates compiled by CapitalSpectator.com.
The slowdown is clear, but estimates still point to a low risk of recession. According to the median forecast, the economy is expected to grow at a real pace of 2.1% annually in the third quarter.
If current forecasts are accurate, growth would reflect a somewhat slower expansion than the strong 2.8% increase in the second quarter. The Bureau of Economic Analysis is due to release its first set of third-quarter data on Oct. 30.
The obvious caveat: It’s still early in the third quarter, so current forecasts should be viewed with caution. A lot can and probably will happen between now and the end of October, when the government releases its preliminary third-quarter report. For now, however, the preliminary analysis provides a relatively optimistic outlook.
Today’s data also dispels recent concerns that a U.S. recession has begun or is imminent. In addition to today’s Q3 forecast, a number of other business cycle gauges underscore the need to ease fears of a recession in the near future.
As we wrote a week ago (August 7), “the arguments for the increased risk of recession still look weak.”
But it is also shortsighted to assume that recession risks will be low during the fourth quarter and beyond. Looking beyond a month or two to assess U.S. economic conditions is highly speculative, but for the purposes of scenario analysis, it is reasonable to look at what might happen and monitor key factors to assess assumptions over time.
There is also a view in some quarters that slower growth will keep the US out of a formal recession, but at the same time produce a lesser outcome that may look like a slight downturn.
Analysts at Bank of America (NYSE:) expect “2% growth, then 1.5% growth over the next six quarters, and kind of back and forth with that growth rate, more or less,” says the bank’s CEO, Brian Moynihan.
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