Key highlights:

• The near- term outlook is stronger. July data – particularly for consumption – are consistent with robust growth in Q3 and we have also revised Q4 higher given current momentum.

• For the full year, we see GDP growth in 2023 of 2.1% (from 1.9%) but growth in 2024 is expected to be lower at 0.8% (was 0.6%) as we still see a material slowdown taking hold.

• While growth remains above trend – something the Fed Chair has flagged could justify further rate hikes – the easing in labour market pressures and inflation should mean the Fed stays on hold this month.

Early Q3 take

Early indications of Q3 GDP growth are positive. In particular, household consumption grew by 0.6% m/m in July. This was on top of 0.4% m/m growth in June and, as a result, consumption is already 0.9% above its Q2 level. While there appear to be some transitory factors at play (Amazon Prime day, utilities consumption), the strength was reasonably broad based. As a result, Q3 consumption growth is likely to be strong.

Read the full report here US Economic Update (5 Sept. 2023)