- Gross domestic product is on track to grow at a 5% annual rate in the third quarter, according to the Atlanta Fed's GDPNow tracker.
- The tracker jumped from 4.1% Tuesday after U.S. retailers reported a surge in sales in July.
- The GDP model highlighted the resilience of consumer spending, which has continued unabated even as high interest rates and tight credit from banks has made it harder to borrow and spend.
The U.S. economy is poised to grow even faster in the third quarter of the year, thanks to consumers who just won’t stop spending.
The outlook for real gross domestic product, an inflation-adjusted measure of the country’s entire economic output, rose on Tuesday after U.S. retailers reported an unexpectedly large jump in sales for July, according to Census Bureau data. The Atlanta Fed’s GDPNow tracker showed the GDP growing at an annual rate of 5% in the third quarter, up from 4.1% before the retail report. That would be the fastest economic growth since 2014 (other than the bounce-back in the immediate aftermath of the pandemic.)
“What do we always say? Never underestimate the American consumer? That was certainly the case in July,” Jennifer Lee, senior economist at BMO Capital Markets, said in a commentary.
The surge in the GDP tracker highlights the central role that consumer spending plays in the economy, making up 68% of the total GDP. Spending has stayed resilient in recent months despite high interest rates for consumer loans, and the fact that banks have become less likely to extend credit. That’s helped the economy avoid a long-predicted recession, at least so far.
The GDP Now tracker uses current economic data to provide a running estimate of what the third-quarter GDP figure will be when the Bureau of Economic Analysis releases the official data in October. The tracker changes as new information comes in, and the economists who made it caution that it’s a volatile projection.