10202018Sat
Last updateFri, 19 Oct 2018 1pm

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Estimates Suggest Strong Third Quarter GDP Growth

Estimates of GDP for third quarter 2018 suggest growth will remain close to its second quarter rate of 4.2%. At the low end is the Survey of Professional Forecasters’ estimate, which suggests the economy will expand 3%. At the high end is the Atlanta Fed forecast of 4.4% growth, buoyed by a rise in inventory accumulation, which is estimated to contribute 2% to third quarter growth. In addition, estimates of annualized real consumption expenditure growth in July of 2.8% are consistent with strong consumption in the third quarter. 


U.S. Tops Global Competitiveness Ranking

With a score of 85.6 out of 100, the U.S. is no. 1 in the World Economic Forum’s Global Competitiveness Report. It notably leads the Business dynamism pillar, thanks to its vibrant entrepreneurial culture, the Labor market pillar (score of 81.9 out of 100) and the Financial system (92.1) pillar. These are among the several factors that contribute to making the U.S.’ innovation ecosystem one of the best in the world (86.5, 2nd behind Germany). The country’s institutional framework also remains relatively sound (74.6, 13th). However, there are indications of a weakening social fabric (63.3, down from 65.5) and worsening security situation (79.1, 56th). 

Empire State Manufacturing Index Points to Strong Activity

Manufacturing firms in New York State reported that business activity continued to expand in October. The general business conditions index moved up two points to 21.1, suggesting that the pace of growth picked up slightly this month. Roughly 36% of respondents reported that conditions had improved over the month, while only 15% reported that conditions had worsened. Looking ahead, firms generally remained optimistic about the six-month outlook. 

Manufacturers Continue Capacity Expansion

Manufacturing technology orders posted an unexpected surge in August, climbing 28% over August 2017 and bringing the year-to-date growth rate to 23% for 2018. The latest U.S. Manufacturing Technology Orders Report from the Association for Manufacturing Technology showed that orders totaled $501 million for the month, up 26% from July and the largest August order level in the program’s history.

Texas Economy Growing but Signs of Constraints Emerge

Year to date, Texas employment growth is an annualized 3%, well above the U.S. growth of 1.7%. Regional activity is also expanding rapidly, with the September readings of the Dallas Fed Texas Business Outlook Surveys remaining near multiyear highs for production and revenue. Moreover, Texas personal income growth in the second quarter was the highest in the nation at 6%, which bodes well for second-quarter GDP growth. First-quarter real GDP, the most recent GDP data available at the state level, shows the Texas economy grew an annualized 2.9% quarter over quarter compared with 2.2% for the nation.

The Texas economy is likely growing above potential, which means there may be capacity constraints acting as bottlenecks or speed limits on the expansion. 

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