The economic growth of the U.S. is expected to pick up. The third quarter GDP growth is likely to see an expansion of 2.5 percent annualized, according to Lloyds Bank in a research note. If this expectation is realized, it would be a significant pickup on the second quarter’s anaemic growth rate of 1.4 percent. However, much of the expansion would show a turnaround in the inventory cycle.
Therefore, policymakers would possibly pay more attention to final demand that is likely to be solid enough for most Fed policymakers to underpin a hike in interest rate in December.
“We expect this to show that economic growth continues to be driven by consumer spending, albeit at slower pace than in Q2, while the pace of both business and housing investment gains remain relatively anaemic”, added Lloyds Bank.
Moreover, the third quarter outturn for the employment cost index would be of interest as well, which is known to be the Fed’s preferred gauge for labor costs. This is likely to indicate just a modest rise in wage growth.
Meanwhile, the opinion polls in the wake of the third presidential election debate indicate that Democratic candidate Hillary Clinton has increased her lead, stated Lloyds bank. Given that the odds of a Donald Trump presidency seemingly lengthening, focus in the run-up to polling day might switch to if the Democrats could wrest back control of one or both houses of Congress, noted Lloyds Bank.
If that happens, it would be significantly easier for Clinton to put her policy agenda into action. But, current indications are that, while a slim Democratic majority in the Senate is a considerable likelihood, gaining control of the lower house would be quite difficult, said Lloyds Bank.
