CEIC’s latest nowcast projects more upbeat US growth

Our latest nowcast is bolstering the case for a US soft landing. In fact, growth is picking up -- fodder for a scenario where the Federal Reserve will cut rates more slowly than expected.

Third-quarter gross domestic product likely expanded by 3.8% y/y on an annualized basis, picking up from the 3% pace in Q2, according to the CEIC GDP Nowcast. This would be the most robust quarterly expansion since the rate-hiking cycle began in early 2022.

Our nowcast also predicts that GDP growth will be stable through the current quarter and will accelerate in the first part of 2025 -- reaching an annualized rate of 4.3% by the first quarter.

Treasuries have been selling off at a rate that Bloomberg News recently compared to 1995, when former Fed Chair Alan Greenspan famously orchestrated a soft landing after a rate-hiking cycle. Interest-rate swaps are showing that traders expect rate cuts of about 1.25 percentage points over the next year, compared with 2 percentage points foreseen just a month ago.

While at least one further Fed cut is expected by the end of 2024, a strong growth number could affect whether the key rate has been reduced by 50 or 25 basis points by the start of 2025.

The official GDP figure will be released by the Bureau of Economic Analysis on Oct. 30.

This weekly nowcast is one of CEIC's newest additions and is calculated based on the Mixed Data Sampling (MIDAS) model. For GDP nowcasts, CEIC's proprietary model extracts signals from both alternative and traditional economic datasets in differing frequencies (including weekly and monthly).

We've also expanded our offering with a range of similar nowcasts for the United Kingdom, France, Germany, Canada, Mexico, Japan, South Korea, and Turkey.

Released weekly, our nowcast range adjusts for the different number of explanatory variables available and accounts for the staggered timing of data releases. Our approach allows users to see the relative contributions of various explanatory variables, while making use of the large repository of data provided by CEIC.

As our final chart shows, for the most recent quarters, almost half of our nowcast signals were extracted from labor market-related datasets (e.g.: private sector payrolls and unemployment insurance). Datasets on energy, production, loans and retail sales provided further clarity.                                         

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