US GDP Preview: Forecasts from 10 major banks, another strong print

We expect fourth quarter GDP growth to come in at around 2.5% – and with the unemployment rate ending 2023 at just 3.7% and inflation still well above target in YoY terms, there seems to be little pressure to start cutting rates imminently. 

We expect real GDP growth to print at an annualised +2.3% in Q4, down from +4.9% in Q3.

We expect real GDP to have registered a below-trend 1.6% QoQ AR expansion in 23Q4, much slower than Q3's blockbuster and unsustainable 4.9% increase.

We are currently tracking 2% annualized increase in US GDP in Q4 2023, supported by a robust gain in consumer spending. Residential investment likely continued to grow on higher housing starts, albeit at a slower rate than in the prior quarter.

Domestic demand likely remained vigorous during the quarter, supported by strong household consumption and, to a lesser extent, government spending. All in all, GDP could have expanded 2.0% in annualized terms.

GDP is likely to have been more resilient than had been expected after the surge in Q3, and we estimate a 1.9% growth rate, roughly in line with potential growth.

Our forecast calls for 2.5% QoQ SAAR, above the current consensus number of 2.0% but in line with the Atlanta Fed Nowcast (2.4%). Once again, most of the strength in GDP will come from the sizzling consumption prints we’ve seen. But other components of domestic demand should also be solid in the quarter. However, with consumers continuing to pull goods off the shelves quickly and imports weak, downside risks to inventory accumulation are fairly high. Markets are overly optimistic on how much the Fed will ease and the GDP print will likely be an opportunity to recalibrate. The source data indicate another strong outturn for domestic demand and that will likely be enough for some pullback in market pricing despite potential volatility from inventories and net exports that could push down the headline number.

Although we no longer forecast a recession on the horizon, we suspect that the pace of real GDP growth will moderate in the coming quarters. To that effect, we estimate that real GDP grew at an annualized pace of 1.7% in Q4, a downshift from 4.9% in Q3. 

We estimate a 2.1% annualized growth in GDP for Q4 2023. This growth is attributed to strong consumer spending (+2.9%) and government expenditure (+3.5%). However, a decline in the housing sector (-6.3%) and a 0.7 percentage point negative contribution from inventories are expected to impact overall growth.

We expect a 2.0% QoQ SAAR increase in real GDP by expenditure in Q4 with the largest support to growth again coming from consumption with we expect consumption to rise a still-strong 2.6% in Q4. Other elements of GDP in Q4 should only contribute modestly to growth.