Prophets Of Boom Say U.S. Will Grow 'Decently'

Economists are actually predicting decent, if not spectacular growth. The consensus forecast from economists surveyed by Reuters is that GDP grew at an annualized pace of 2.1% in the third quarter.

Photo Insert: The Fed will likely continue to sharply raise interest rates to choke off inflation once and for all, but that increases the odds of an eventual recession down the road since rate hikes take time to impact most parts of the real economy, with mortgage rates and housing being the notable exception.

This will be the first estimate for third-quarter GDP, and there will be several revisions in the coming weeks, Paul R. La Monica reported for CNN Business.

There's an even rosier projection from the Federal Reserve Bank of Atlanta, whose widely watched and well-respected GDPNow model tracks all the latest economic data and comes up with a projection for GDP.

The latest GDPNow reading calls for 2.9% annualized growth. Why so rosy despite all the bleak news? For one, a big chunk of GDP is comprised of consumer spending — and though we're all complaining about inflation, rising prices haven't actually stopped consumers from splurging just yet.

According to figures from the government, retail sales were up 8.2% in September from a year ago.

It also helps that the labor market is still healthy. American companies are adding hundreds of thousands of jobs a month, the unemployment rate is near a half-century low of 3.5% and wages are growing (albeit not as fast as prices.)

If GDP winds up rising somewhere between 2% and 3% — instead of contracting as it did in both the first and second quarter — it means it's less likely we're in a recession. That would be welcome news for consumers, investors, and the Federal Reserve.

That also means the Fed will likely continue to sharply raise interest rates to finally choke off inflation once and for all. Yes, that increases the odds of an eventual recession down the road since rate hikes take time to impact most parts of the real economy, with mortgage rates and housing being the notable exception.

"The Fed risks triggering a US recession with its rate hikes, but the greater risk is an economy at the mercy of rising prices," said ADP chief economist Nela Richardson in a report. She argued that inflation may boost growth nominally as consumers spend more...but it comes at a cost. It eats into workers' paychecks.

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