The Zhitong Finance App learned that at a time when many macroeconomic data “turned red light” in recent times, economists raised their forecasts for the US economic growth in the third quarter, reflecting an increase in their expectations for consumer spending and private investment, including capital expenditure related to artificial intelligence (AI).
According to this monthly survey of 85 economists conducted from August 14 to 19, the US gross domestic product (GDP) for the third quarter is expected to grow by 2.5% at an annual rate, up from 2% in the previous survey; the growth forecast for the fourth quarter has not changed much and is still within a narrow range of 2% to 2.2%.
James Knightley, chief international economist at ING, said: “Technology/AI-related investments are the main factors driving the increase in corporate capital expenditure, while spending on high-income households is the main source of consumer spending growth.” According to data from industry research analysts, the total capital expenditure related to artificial intelligence is likely to exceed $1 trillion this year and reach more than $1.5 trillion in 2027.
At the same time, economists' inflation forecasts until 2027 have hardly been adjusted. Excluding food and energy, the personal consumption expenditure (PCE) price index is expected to average 3.2% this year, before falling to 2.5% in 2027. And as so-called core PCE price indicators show that inflation is slowing, economists expect the Federal Reserve to keep interest rates unchanged until July next year. Economists also lowered the average forecast for the number of new non-farm payrolls this year. Currently, the monthly increase is 66,000, and the scale of monthly employment growth in 2027 is also expected to be roughly the same.
Knightley said, “Employment and inflation data is cooling down, and the market feels that the new Federal Reserve Chairman Kevin Walsh is less willing to raise interest rates, which makes market pricing less aggressive. Currently, the market believes that the probability of interest rate hikes in September is less than 50%.”
Multiple data “lights up red”
It is worth noting that the war in the Middle East continues to pose a risk to the US economic outlook, as it may push oil prices and consumer prices to rise further, while also dragging down economic growth. At a time when the inflation rate is above the Federal Reserve's target level of 2%, if the supply shock continues for a longer period of time, it will make policy makers face a more difficult situation.
However, various data released since this month have highlighted the challenges facing America's economic growth prospects. Earlier this month, data released by the US Department of Labor showed that the number of non-farm payrolls fell by 23,000 in July, far less than the 80,000 increase expected by the market. Meanwhile, the number of new non-farm payrolls was lowered from 129,000 to 63,000 in May, and the number of new non-farm payrolls was lowered from 57,000 to 20,000 in June; after the revision, the total number of new jobs added in May and June was 103,000 lower than before the revision.
The unemployment rate fell from 4.2% in June to 4.1% in July, the lowest level since June 2025, below market expectations of 4.2%. The labor participation rate continued to decline, from 61.5% in June to 61.4% in July. Although the unemployment rate is still in place, it is largely due to a large number of workers leaving the labor market rather than the solid employment situation itself. In terms of wage growth, the average hourly wage increase in July was 0.1% month-on-month, lower than market expectations of 0.3% and June 0.3%; the year-on-year increase was 3.2%, lower than market expectations of 3.5% and June's 3.5%. This non-farm payrolls report shows that the US labor market may be beginning to weaken under the influence of rising prices and the uncertainty brought about by the Middle East War.
Furthermore, retail sales in the US fell 0.6% month-on-month in July, the biggest decline since May 2025. It fell below the market's unanimous expectations of 0.1% month-on-month increase, and fell sharply from the previous 0.2% month-on-month increase. Since about 70% of US GDP is driven by consumer projects, retail sales data is an important guide for investors to judge the current state of the US economy and monetary policy prospects.
And as household concerns about the deteriorating business environment and rising prices intensified, American consumer confidence declined for the first time in three months in August. According to preliminary data released by the University of Michigan, the consumer confidence index fell to 51 in August, lower than the final value of 55.2 in July, and clearly below the 55 expected by economists. The survey showed that US consumers' concerns about inflation are heating up. The interviewees expect prices to rise 4.3% in the next year, slightly higher than the previous month, and significantly higher than the level before the Middle East conflict broke out in February this year.
The heads of many leading companies, including Kraft Heinz (KHC.US), McDonald's (MCD.US), and Whirlpool (WHR.US), are also speaking out intensively, warning that consumption momentum may be approaching a tipping point. The latest earnings report released by Walmart (WMT.US) this week confirms this warning. Although both revenue and earnings per share exceeded market expectations, Walmart's same-store sales increased by only 2.6% in the second quarter, the lowest level in more than six years, far below market expectations of 3.7% to 3.8%. More importantly, Walmart's annual earnings per share guide fell short of expectations, causing investors to worry. If even Walmart, a retailer that has always had an advantage in the downturn in consumption, starts to see signs of slowing growth, then the inflection point of the overall consumer economy may be approaching.