Economists at Atlanta Fed estimate a 5.8% GDP growth forecast for the US economy, up from an annualised 2.4% growth in Q2. Current accelerating economic conditions are a reversal of the imminent recession narrative spurred from contractionary interest rate hikes to 5.00 – 5.25% over the last 18 months.
However, the forecasted pickup in economic activity would run counter to the Fed’s goals in slowing down inflation that has only just cooled down to 3.2% in July 2023 from its peak of 9.1% earlier in the year. Strong economic data points to cooling price pressures, an optimistic sign of economic recovery in driving up a bounce-back in global growth. A return of strong growth bolstered by a surprising surge in U.S. industrial output and housing starts opens greater room to raise rates without concern of falling GDP growth, lowering the risk of a hard landing of the inflation bubble.
Nonetheless, the US continues to face a host of headwinds such as tighter credit standards, lower savings levels and the lag impact of elevated interest rates that have yet to show full impacts on the future outlook of the US economy.