The slowdown in US activity in the 4th quarter should be lighter than expected

The US economy is expected to lose steam in the fourth quarter compared to the third quarter, but growth forecasts have improved recently, according to improved high-frequency indicators.

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The average estimate from a collection of short-term data compiled by CapitalSpectator.com points to a 2.0% expansion in the fourth quarter. This pace is below the 4.9% jump recorded in the third quarter. However, today’s revised average for the fourth quarter is up from earlier estimates.

The median instant estimate released on November 8 was a more modest estimate of 1.0%. The latest update is encouraging, but the critical question remains: Will subsequent indicator updates for the fourth quarter confirm stronger forecasts?

If it does, the news will bolster confidence that the fourth-quarter slowdown will be milder than recently expected and that today’s update is more signal than noise.

Using today’s revised estimate as a yardstick, the chances of a recession beginning in the near term seem less likely.

Goldman Sachs (NYSE:GS), for example, said yesterday (Nov. 15) that “the likelihood of a U.S. recession is much lower than generally believed — reiterating its long-term outlook of just 15% over the next 12 months. .”

Nancy Vanden Houten, chief US economist at Oxford Economics, agrees.

“What we’re hoping for right now is a soft landing,” he says. “We expect the economy to cool significantly, but seem to be avoiding a direct contraction in GDP”.

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Written by:
James Picerno