U.S. underlying growth set to slow after strong private demand in Q3, Pantheon says

What happened

Pantheon Macroeconomics provisionally expects U.S. gross domestic product to grow at an annualised rate of 2.5% in the third quarter, below the 3.2% consensus forecast ahead of Thursday's advance GDP release, after strong private demand in the prior quarter.

Confirmed

Global impact / market context

Slower headline growth alongside strong private demand matters because net trade and inventories could subtract just under 2 percentage points from GDP, which means the official growth figure may understate or overstate the economy's true momentum.

Analyst inference

The monthly trade deficit averaged $99.2B in July and August versus $63.9B in the second quarter, and private fixed investment is expected to rise about 9%, its biggest gain since late 2020, complicating the growth picture.

Analyst inference

What to watch

1. Watch Thursday's advance GDP release and September trade and inventory data, which Pantheon said could materially change its estimate of just under 2 percentage points subtracted from third-quarter growth. Confirmed
2. Track whether final sales to private domestic purchasers, forecast to rise just over 4.5%, remain a reliable underlying growth gauge, given Pantheon's caution about imports of chips meeting investment demand. Proposed
3. Watch whether slower underlying growth pressures Treasury yields and bond prices, since the known assets include short-, medium- and long-dated Treasury exchange-traded funds that react to growth expectations. Analyst inference

Evidence

• seekingalpha.com