WASHINGTON–Two CU economists are predicting that announcements coming later this week will show economic growth well above projections, but neither expects the Fed to move on rates just yet.
Mike Schenk, VP research and policy analysis with CUNA, said the data released by the Bureau of Economic Analysis last week showed the U.S. economy grew well above what many economists expected when it reported 3% growth.
BEA data also showed personal income increased $66.9 billion (0.4%) in September, with disposable personal income (DPI) up $53.0 billion (0.4%)
“The really good news from a fundamental perspective is consumers are obviously engaged with spending,” said Schenk. “More importantly, from a credit union perspective, spending on durable goods was up 8.3%. That’s a pretty good indication that when our credit union numbers come out they will reflect relatively strong loan growth. We remain on track for double-digit loan growth. We expect these to continue going forward into the fourth quarter.”
Schenk said that when the Federal Open Market Committee meets this week he expects there will be “chatter” about inflation pressures, but he does not anticipate the Fed will make a move.
In addition, on Friday, the federal jobs report will be released and Schenk is expecting it will show a robust increase of more than 300,000 new jobs.
Similarly, NAFCU Chief Economist and Vice President of Research Curt Long noted that "Consumer spending continues to propel the economy as the labor market tightens," Long said in a NAFCU Macro Data Flash report. "However, the growth rate slowed somewhat during the quarter, possibly due to weather-related impacts."
Consumer spending increased 2.4% during the quarter.
Long said investments being made following the hurricanes that hit major markets in the U.S. will also help to propel growth.
Personal consumption expenditure (PCE) inflation, the Fed’s preferred inflation metric, rose from 0.3% in the second quarter to 1.5% in the third quarter. Meanwhile, core PCE inflation (excluding food and energy) increased from 0.9% to 1.3%.
Long said the only "sizable drag" on the economy from this estimate came from residential investment as housing starts slowed during the quarter. "Construction activity has been undermined by labor shortages and rising material costs," Long added. "Looking ahead, replacement vehicle purchases and rebuilding activities are expected to boost economic growth over the remainder of the year."