The U.S. economy is running even hotter than previously thought, and GDP growth could reach 4% in Q3

On Thursday, the growth of the second quarter was reviewed to the top, to 3.8 % of the previous 3.3 % reading, on strong consumer spending. This is after a decrease in the first quarter that was led by president Donald Trump’s trade war.

Meanwhile, growth in the third quarter is formed to be hotter. August’s solid goods have jumped more than expected, according to the data issued on Thursday. On Friday, the income and personal spending report showed that consumption remained in good health in August while also leading expectations.

Given that consumer spending represents more than two thirds of the American economy, the gains are more than twice the displacement of housing, which are still preserved due to high home prices and mortgage rates.

The GDP in Atlanta Virus, the GDP, puts a growth in the third quarter by 3.9 %, with an increase of a previous estimate of 3.3 %, indicating consumption data and a narrower commercial deficit in August.

Growth may not stop at this noble rate. Stephen Brown, Vice President of Economists in North America at Capital Economics, said in a memorandum on Friday that income and spending data should reduce fears that the United States is on the threshold of sharp slowdown.

He also indicated that the estimated spending, which is usually cut when consumers suffer, has led growth. Although the gains in spending have surpassed income during the past three months, the Saving August rate is still relatively 4.6 %, which means that consumers have not yet been excessive.

“The rise in real consumption in August means that, given the strongest momentum in the third quarter, we now follow the growth of consumption in the third quarter of up to 3.3 %, up from 2.3 % last week,” added Brown. “GDP growth in the third quarter will be to 4 %.”

Certainly the strongest gross domestic product also means that the federal reserve will be under less pressure to reduce its rates strongly. Capital Economics expects that the Federal Reserve will reduce one of its remaining meeting this year, while Wall Street is betting on the cuts in both meetings.

Fear stagnation

Optimistic growth expectations contrast with warnings of the chief economist in Moody analyzes Mark Zandy, who said the economy is “on the edge of stagnation.”

While the third quarter, which ends on Tuesday, looks good, it has expected the United States to be more likely to stagnate in late this year and early than the effects of Trump’s tariff and migration climax.

Although consumption remains flexible in the face of inflation and high definitions, housing may lead to a decrease in the economy. Zandi referred to constructive permits as a more important economic variable to predict stagnation, and it is now at its lowest level in the epidemic.

The gains in total consumption block the sharp gap between American consumers, and the increasing dependence on the major papers.

MOODY has recently estimated that 80 % of its owners have only spent in line with inflation since the epidemic, while the best 20 % lead growth.

“As long as they continue to spend, the economy must avoid stagnation, but if they turn more cautious, for any reason, the economy suffers from a big problem,” Zandy pointed out.

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