📝Expect U.S. Real GDP Rising 5.0% In Q3: Wells Fargo

The U.S. economy's resilience will likely be on full display in the third quarter's advance GDP print. Consumer spending kicked off the quarter with plenty of momentum, as real personal consumption expenditures (PCE) rose 0.6% in July. Even with August's scant 0.1% gain, the latest retail sales data point to a sturdiness in consumer spending at the end of quarter as well. We suspect real PCE expanded at a 4.2% annualized rate in Q3, a notable pickup from the second quarter's 0.8% gain.

Beyond the consumer, we estimate real business spending on equipment edged down. Modest gains in intellectual property and nonresidential construction investment likely offset the weakening in capital expenditures, however. Elsewhere, we suspect residential investment snapped its nine-quarter streak of contractions, and we look for real net exports to positively contribute to growth. Piecing these expectations together, we forecast real GDP expanded at a 5.0% annualized rate in Q3. If realized, economic growth will be up 3.0% on a year-over-year basis, roughly half a percentage point ahead of its pre-pandemic average.

-Wells Fargo