Why Real GDP Forecasts Are Coming In Higher Than Expected

The U.S. Bureau of Economic Analysis will be reporting on Oct. 28 an advanced estimate of third-quarter gross domestic product (GDP).

In the first half of the year, America’s GDP saw two declining quarters of GDP growth, which typically means the country is in a technical recession.

Although the unemployment rate is at 3.5% as of September, a tight job market is preventing officials from labeling the current economy as being in a recession.

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What Happened: The Federal Reserve Bank of Atlanta last forecasted third-quarter real GDP growth on Oct. 19, estimating that the real gross domestic product is 2.9% (seasonally adjusted annual rate).

After releases from the Federal Reserve Board of Governors and the U.S. Census Bureau, the forecast of third-quarter real gross private domestic investment growth increased from -3.6% to -3.3%.

Furthermore, the Conference Board economic forecast for the U.S. economy expects economic weakness to intensify with a recession beginning before the end of 2022.

The Conference Board is forecasting that 2022 real GDP growth will come in at 1.5% year-over-year and 2023 growth will stifle to 0% year-over-year.

The Conference Board is also upgrading its third-quarter forecast from 0.3% to 0.5%, due to upward revisions in the previous GDP data and numerous economic indicators pointing to economic improvement since the prior quarter.

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Why It Matters: A positive third-quarter GDP report could be a catalyst for markets, aiding the push to the upside in the bear market rally.

Due to hawkish Fed policy, weakening economic growth and a stagflationary environment, The Conference Board is expecting the Fed to push the U.S. into a broad-based recession and will emerge from the slowdown in 2023.

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