The U.S. economy is showing stronger growth than expected, moving from fears of a slowdown to signs of reacceleration.

Recent data, including improved GDP figures, September’s jobs report, and rising retail sales, suggests this shift is real.

The Atlanta Fed’s GDPNow model, updated on October 21, projects a 3.4% growth for the third quarter, a significant rise from 2.6% a month earlier, indicating the economy is gaining momentum.

This would be the strongest growth since last year’s third quarter, when the economy grew 4.4%, also exceeding the long-term average of 3.1%.

Stronger consumer spending has been a major driver, with personal consumption forecasts rising from 3.1% to 3.6% last month.

With the official third-quarter GDP report due on October 30, there is excitement about what it might reveal.

Corporate Earnings Boost Confidence

Strong corporate earnings are also contributing to this positive outlook. According to Bank of America’s Savita Subramanian, 72 S&P 500 companies reported earnings 5% above expectations.

Financials led with an 8% earnings beat, while overall, 74% of companies exceeded earnings expectations. These results suggest corporate America is faring better than many thought.

On Monday, the S&P 500 and the Dow Jones Industrial Average were close to their all-time highs.

Recession Concerns Diminish, Growth Returns

Bank of America economist Stephen Juneau notes that concerns have shifted from recession to potential economic growth. He suggests the economy remains resilient, although caution remains for minor challenges ahead.

Federal Reserve: Slower Rate Cuts Ahead?

The Federal Reserve’s next steps will be closely monitored. After a recent 50 basis point cut, investors now expect a more gradual approach, with a 90% chance of a 25 basis point cut in November—or possibly no cut at all.

Atlanta Fed President Raphael Bostic hinted that skipping the November meeting might be appropriate if the data supports it. Other Fed officials, including Lorie Logan, are advocating for gradual rate reductions if conditions remain favorable.

Ed Yardeni of Yardeni Research warned that more cuts could fuel inflation, while Torsten Slok from Apollo Management noted that the Fed might keep rates steady as the economy stabilizes.

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