U.S. GDP growth: down but not out

The latest ISM indices are consistent with a 3%+ trend in the U.S. GDP growth as the strong non-manufacturing sector continues to offset weakness in manufacturing. After all, the manufacturing sector of the economy makes up only 12% of GDP and 9% of payrolls. 

"We do acknowledge that Q3 GDP growth is struggling to exceed 1%. According to our estimations, real GDP growth of the U.S. is tracking a 1½% annual rate in Q3, pulled down by an estimated ½% point drag from net exports and a big 1½% point drag from inventories", says Nordea Bank. 

Domestic demand is believed to continue as the key driver of US growth, and consumers will lead the way as they have plenty of tailwind, see US Economic Outlook: Solid demand side - weak supply side.

For the overall economy, the positive impact of lower oil prices and a stronger USD on consumer spending is expected to largely offset the hit to net exports from the Emerging Market shock and the stronger USD.

The U.S. economy will expand a solid, if not spectacular, 2.5% in 2015 as a whole compared to 2014, argues Nordea Bank.