The third-quarter GDP report was a blowout, but don’t expect that to change Mark Zandi’s mind about how the economy is faring.
After a long delay due to the government shutdown, the Bureau of Economic Analysis released the latest economic growth data, and it was a lot more upbeat than economists were predicting.
According to the Q3 report, the US economy is estimated to have expanded at a 4.3% growth rate during the three-month period, driven by robust consumer and federal spending.
Yet, Zandi, the chief economist at Moody’s Analytics, tells Business Insider that he’s still harboring reservations about how things are going under the surface.
Zandi has been ringing the alarm on the economy all year, recently stating that he saw the US on the edge of a recession.
The most recent GDP report doesn’t seem to have restored his confidence that better days are ahead.
“Despite the big gain in real GDP growth in the quarter, underlying real GDP growth — abstracting from the quarterly vagaries of the data — is closer to 2%,” he told Business Insider. “OK, but not great, and not strong enough to create enough jobs, as unemployment is steadily moving higher.”
Zandi was predicting a 3.8% increase in real GDP growth, higher than most economists’ estimates of 3.3%. As such, he isn’t surprised by the numbers, although he also speculated that the big upside surprise may have been driven by technical quirks as opposed to actual momentum.
“The biggest difference with my forecast is the more substantial narrowing of the trade deficit, but this is due to the swings caused by the tariffs. Government spending was also stronger, but this is likely due to a measurement issue,” he said.
Zandi believes that the government shutdown also increases the risk of revision for the Q3 report, with growth potentially being revised downward in the coming months.
“I can’t explicitly connect the dots from the government shutdown, its impact on the government data, and on the GDP estimate,” Zandi said, “But it wouldn’t be surprising if this data is ultimately revised to a significant degree.”
