Daily Spotlight: Raising 4Q GDP Growth Forecast

Summary

We are raising our fourth-quarter 2024 forecast for U.S. GDP growth to 2.8% from 2.3%. The most-significant change to our model is that we expect Personal Consumption Expenditures (PCE) to rise 3.4%, up from a previous 4Q expectation of 2.4%. We expect holiday retail sales to increase approximately 3% to almost $1 trillion, helped by low unemployment and the strength consumers showed in 3Q. We expect continuing growth from the huge services category, which represents about 45% of GDP. The ISM Services PMI is a good indicator. It rose to a two-year high in October. A small offset to our 4Q GDP forecast is that higher mortgage rates are likely to make housing a bigger drag than we expected. We are lifting our full-year 2024 GDP estimate to 2.6% from 2.5%. We still expect 2.0% growth in 2025, with quarterly estimates of 1.7%, 1.7%, 2.3%, and 2.5%. Four indicators driven by a broad array of timely data support our assessment that the economy is healthy and growing. On November 7, the Federal Reserve Bank of Atlanta’s GDP Nowcast was estimating 4Q growth of 2.5%. On November 8, the Federal Reserve Bank of New York’s Staff Nowcast for 4Q was for 2.1% growth. The Weekly Economic Index tracked by the Federal Reserve Bank of Dallas is based on 10 daily and weekly indicators of consumer behavior, the labor market, and production. If, for example, an index value of 2% persisted for an entire quarter, the index would suggest that quarter’s GDP

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