Q3 GDP Growth Eyed Above 4%, Led By Consumers

Tuesday's strong September retail sales control group reading (which is an input to GDP) of 0.6% M/M has spurred some upward revisions to Q3 GDP estimates, not least yesterday's Atlanta Fed GDPNow from 5.15% to 5.44%.

• Expectations are building that Q3 annualized GDP will come in well above the 3.0% BBG September survey median and 2.1% in Q2, and in any case well above potential growth - led by strong private consumption and residential investment, with government consumption and net exports also likely boosting the headline figure.
• Post-retail sales, Deutsche Bank upped its estimate from 4.1% to 5.2%; JPMorgan similarly, from 3.5% to 4.3%; Goldman Sachs from 3.7% to 4.0%. CIBC noted potential upside risks to their 3.9% projection but also noted that the strength in consumption momentum "implies a very strong start to GDP growth in 23Q$, where we had expected a slowdown just below 1%).
• We get the Q3 advance GDP reading on Oct 26 - less than a week from the FOMC decision on Nov 1 and in the midst of the pre-meeting blackout period for Fed speakers.
• A blowout number won't spur a November hike but will be hard for the FOMC to ignore in the deliberations and communications, with participants at the Sept meeting having seen Q3 growth running at a "solid" pace which may be understating the case.
• There hasn't been a 3%+ GDP reading since 2021 and as recently as June the Bloomberg median expectation was negative.