- The economy shows signs of slower growth with third-quarter GDP above 3% but weaker momentum expected in the fourth quarter.
- Consumer spending, especially discretionary, slowed in October, with shifts between goods and services impacting market planning.
- Labor market growth has stalled in most sectors, with federal employment subtracting from job gains.
- Monetary policy is normalizing rather than easing, with rate cuts expected but seen as returning to neutral levels.
- Market volatility is set to continue amid inconsistent economic data and evolving currency dynamics including de-dollarization concerns.
The JP Morgan GDP forecast indicates the U.S. economy is on track for slower growth going into 2025, raising concerns about market stability. Gabriela Santos, chief market strategist for the Americas at JP Morgan Asset Management, highlighted that while the third-quarter GDP estimate remains above 3%, the economic momentum is weaker than anticipated, suggesting a potentially weak fourth quarter ahead.
Santos stated, “We think it’s the GDP report. It’s been particularly strong second quarter over 3% is our estimate for the third quarter as well. But we don’t think the momentum is accelerating that much. So we might actually get a pretty weak report in the fourth quarter.” The data shows volatility in growth components, such as exports cutting growth by five percentage points while inventories added the same amount back, complicating clear assessment.
High-frequency consumer spending data from Chase reveals slowing activity in October, particularly in discretionary sectors like restaurants and bars, which declined in September. Santos noted, “When we look at our Chase data for high frequency data, we’re seeing a little bit of a slowdown in October. And consumer spending, especially around discretionary.” The pattern of spending between goods and services has shifted unpredictably, making it difficult for businesses and investors to plan.
The labor market is showing signs of cooling with private sector hiring nearly stalled except in a few industries. Federal government employment has negatively affected job gains since January. In terms of monetary policy, markets expect about 100 basis points of rate cuts over the next year aiming to reach neutral rates around 3%. Santos emphasized, “This is really just a normalization of rates. This is not an accommodation of policy.”
The JP Morgan economic outlook also discusses ongoing currency shifts, such as de-dollarization, which may affect the U.S. dollar’s international role. Markets face volatile conditions due to inconsistent economic data and these evolving currency trends, which investors must consider alongside traditional indicators. Earnings season will offer further insights to gauge the emerging economic momentum. For more detail see the JP Morgan GDP forecast.
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