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Friday’s U.S. gross domestic product report will show just how much support the tight labor market and tax cuts are offering the economy amid rising uncertainty about trade.

StockMarketNews.Today - Friday’s U.S. gross domestic product report, the last before the midterm elections that will determine control of Congress, will show just how much support the tight labor market and tax cuts are offering the economy amid rising uncertainty about trade.

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While President Donald Trump said third-quarter growth would be “outstanding,” economists project the expansion was a bit slower than the prior period, though still strong by recent standards. GDP probably grew at a 3.3 percent annualized pace after a 4.2 percent gain in the prior quarter, according to the median estimate of economists surveyed by Bloomberg. That would be the strongest back-to-back quarters since 2014, amid boosts from consumer spending, business investment and the restocking of inventories. Projections range from 2.4 percent to 4.2 percent. Here’s what some forecasters are saying ahead of the Commerce Department data due at 8:30 a.m. in Washington:

Credit Suisse

“Strong consumption and solid business investment continue to underpin growth,” economists led by James Sweeney wrote in a note. “Trade and inventories will continue to be volatile, but will largely offset each other, with a large drag from net exports balanced by a recovery in inventories.” Business spending should remain solid, while residential investment is likely to decline. “We expect growth to remain above-trend in the medium term, but some of the strength in the past two quarters could prove temporary” as a modest slowdown in consumption and energy investment weigh on growth, he wrote.

Bank of America

“A big story of this quarter is the significant positive payback in inventories,” which are likely to contribute more than 1 percentage point to growth, economists led by Michelle Meyer wrote. Consumer spending growth should remain robust at close to 3.5 percent while equipment and government spending accelerate, though “trade will be a big drag.”

Wells Fargo

The economy should prove healthy, with real consumer spending increasing at a 3.4 percent rate, according to economist Sam Bullard. Tailwinds for the sector include job market strength, rising wages and disposable income growth, and elevated confidence, he wrote in a report. Still, weakness in exports and a rebound in imports suggest that net exports will “exert significant drag” on overall third-quarter growth, subtracting 1.6 percentage point.

Bloomberg Economics (3.2%)

Economists Carl Riccadonna, Yelena Shulyatyeva and Tim Mahedy raised their forecast from 2.8 percent to reflect “a more positive, sustained impact from changes to tax policy — which may signal some supply-side benefits from corporate tax cuts — while at the same time showing a smaller impact on consumer and business demand from trade tensions.” Demand may remain intact, but “wild swings in net exports and business inventories are likely to be at least as dramatic as they were in the second quarter,” they wrote in a note.


More News: Dollar nears 10-week high before U.S. GDP data. The dollar hovered near a 10-week high on Friday as investors waited to see if U.S. economic growth figures do anything to interrupt its months of strength. Traders expect a potentially strong reading of U.S. gross domestic product data on Friday which could see the dollar climb further.

Today’s robust U.S. GDP will illustrate to the market the deep division between the U.S. and the euro zone when it comes to growth performance,” said Commerzbank analyst Thu Lan Nguyen. Speculation that U.S. interest rates will be hiked more aggressively than anticipated next year would see the dollar strengthen against the euro, she added. If the reading is lower than expectations, however, investors could worry about economic growth momentum hastening a change in the Federal Reserve’s monetary tightening path.

“This number could give signs if we are close to peak earnings for U.S. corporates. Housing data and consumer goods durables data has been soft lately,” said Sim Moh Siong, currency strategist at Bank of Singapore. The U.S. economy is expected to have grown at a 3.3 percent annualised rate in the third quarter, following 4.2 percent in the second quarter. The Fed is expected to raise rates by 25 basis points in December.

The euro, meanwhile, traded marginally higher at $1.1383 on Friday. It hit a two-month low of $1.1353 the previous session, following European Central Bank President Mario Draghis failure to convince traders the ECB could pursue monetary tightening after next summer as political and economic uncertainties grow in the monetary union.


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The policy guidance has been consistent since June, even though the economic outlook has darkened as political turmoil about Italy looms over the currency bloc. Analysts said markets remain sceptical about the ECB rates given inflation remains tepid. Elsewhere, a rebound of U.S. stocks on Thursday following the previous session’s big sell-off was not sustained into the Asian day, which lent support to safe haven currencies.

The U.S. dollar lost 0.2 percent to be 112.14 versus the Japanese yen, a safe haven currency, while the Australian dollar, often viewed as a gauge of risk appetite, hit a near 33-month low.

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