U.S. economic growth likely to expand modestly in Q3, net exports to add to economic growth

The U.S. economy continued to see gradual modest growth through the third quarter; however, a considerable rebound is expected from the modest average pace of 1.1 percent in the first half of 2016 to a pace of abound 2 percent – 2.5 percent in the second half of 2016, stated Societe Generale in a research note.

Employment in the U.S. is showing robust trends, while the weekly jobless claims readings are close to all-time lows. However, this is in contrary to the jobless rate, which is anticipated to rise, because of a higher participation rate. The combination of the GDP growth rate and the rise in headline inflation rate provides the U.S. Fed with the green light to hike rates in December, according to Societe Generale.

Admittedly, recent comments from the Fed officials and FOMC minutes published recently from the September meeting add to the momentum for a 0.25 point hike in December.

“We mark down our 3Q16 growth forecast to 2.5 percent (SAAR versus 3.3 percent) which results in a full year 2016 forecast of 1.5 percent (versus 1.6 percent previously)”, added Societe Generale.

The U.S. net exports are likely to positively contributed 0.2 percent to the third quarter GDP growth; whereas inventories are anticipated to positively contribute 0.2 percent to the growth. The U.S. economy is likely to see moderate growth through the end of 2017.