US domestic strength to outweigh external weakness

US Fed will want to see confirmation that the slowdown in China had no material spill-over effects, either via the dollar, commodity prices or broader financial conditions. This is likely the case before year-end. 

"The progress on the labor market should likely continue. The unemployment rate will drop to 4.9% by Q4. Achieving full employment should serve as a buffer against any lingering uncertainty on the global economy. On balance, the GDP growth is likely to average above 3% in H2", says Societe Generale.

Outside of the labour market, the data is likely to be uneven, but generally consistent with above-trend growth. Manufacturing activity will probably suffer renewed weakness on the back of dollar strength and lower energy prices. The latter will also depress business investment, as discussed here. 

"The key to offsetting these drags on growth will be consumption and housing. Consumer demand is expected to be boosted by the energy dividend, and note that the positive impact should materialize faster than it did during the winter months", states Societe Generale. 

Housing should be relatively unaffected by external events unless there is significant damage to consumer confidence.  But given the Fed's sensitivity to uncertainty, it by no means guarantees a hike.