Should Americans prepare for 5% GDP growth in Q3?

One early predictor says yes

President Donald Trump made a campaign promise to make 4% gross domestic product growth a reality in the U.S.

In the second quarter this year, that promise became a reality when GDP surged at its fastest pace since the third quarter of 2014 to 4.1% in the second quarter this year, according to the U.S. Bureau of Economic Analysis.

But now, some predictors indicate growth in the third quarter could be even more substantial, surpassing the 5% mark.

The Atlanta Fed’s preliminary forecast predicted GDP will jump to 5% in the third quarter this year. However, this predictor is known for its volatility, and though it usually starts off strong, its predictions usually cool as the quarter progresses.

For example, months after Trump took office, the GDPNow Forecast predicted an increase of 3.8% in the third quarter of 2017, leading many of the president’s supporters to point out he was keeping his campaign promise. However, the quarter’s GDP later came in at below 3%.

At the time, one economist explained why the forecast is so volatile:

“They are not the official Atlanta Fed GDP forecasts but a model that tries to give more timely estimates of what the official BEA GDP estimate will be,” said Mark Fleming, First American Financial Corp. chief economist. "The interesting thing to do is watch how the GDPNow forecast evolves as data is released.”

But while 5% GDP growth may seem like a stretch at this point, experts also didn’t predict GDP would reach more than 4% in the second quarter this year.

At this point, many economist are skeptical that the third quarter will post strong growth, saying the second quarter saw an increase based on several short-term growth factors such as a boost in soybean exports ahead of Trump’s tariffs or fiscal stimulus from the federal budget.

“While the Fed hailed activity growth as strong at its policy meeting this week, we doubt GDP growth will maintain a 4% plus annualized pace in the third quarter,” Capital Economics Senior Economist Michael Pearce said. “It’s early days, but data released this week supports our view that growth will slow to a more moderate 2.5% to 3% annualized in the third quarter, well below the Atlanta Fed GDPNow estimate of 5%.”

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