After nearly all economists were skeptical two years ago when President Trump promised four percent growth in gross domestic product (GDP), it seems that some celebratory congratulations are in order after this year’s second quarter read 4.1 percent growth, the highest in four years. Even though last Friday’s numbers were substantial and were better than what the U.S. central bank was predicting, the Atlanta Federal Reserve’s “GDPNow” model predicts that growth in Q3 now stands at a full, fat five percent, up slightly from an initial estimate of 4.7 percent.
A report from Business Insider says that a strong initial reading from the Atlanta Fed is likely to hold up through the financial quarter.
While head of U.S. economic research at Renaissance Macro Neil Dutta says that it is “unlikely that we’ll get 5% for the third quarter,” he explained that the GDPNow model moves over the course of a quarter, with an average drop of 0.6 percentage points. Therefore, based on the initial reading of 4.7 percent, the final Q3 GDPNow estimate would be 4.1 percent. This would be more in line with the second quarter and still one of the highest readings in the post-recession era.
However, GDPNow does move upward at times, with the largest increase from an initial reading being 1.5 percentage points. A move like this would make the final third quarter reading at 6.5 percent, the highest quarterly GDP since the third quarter of 2003.
“Anything in that range is consistent with strong, above-trend growth and would be a reasonably solid number coming after a 4% GDP print,” Dutta said. The Atlanta Fed originally predicted 3.8 percent for Q2, 0.3 percentage points less than the final reported figure.
At a Friday press conference, President Trump remarked, “I happen to think we’re going to do extraordinarily well in our next report.” The next report will be released the morning of Friday, October 26.