• Treasury Secretary Scott Bessent expects a strong third-quarter GDP number, but economists warn of downside risks from a wider trade deficit.
  • Growth forecasts had been upbeat, but September's goods deficit widened more than expected, prompting some to slash their estimates.
  • The official GDP report is due Thursday, with markets also eyeing inflation data that could influence Fed policy.

Treasury Secretary Scott Bessent expressed optimism about U.S. economic growth in the third quarter, saying he thinks the upcoming GDP report will show a strong number. His comments, made ahead of the official release, signal confidence in the resilience of the U.S. economy despite recent headwinds.

The Bureau of Economic Analysis is scheduled to release its advance estimate of third-quarter gross domestic product on Thursday at 8:30 a.m. EDT. Economists surveyed by Reuters (TRI) had forecast annualized growth of 3.2%, while a Wall Street Journal (NWSA) survey put the median at 3.1%. Those expectations, however, were formed before a surprisingly large trade deficit was reported on Wednesday.

The Commerce Department said the goods trade deficit widened 2.1% in September to $134.9 billion, exceeding economists' expectations of $130.2 billion. Imports rose to $344.1 billion, driven by demand for equipment related to artificial-intelligence infrastructure. The wider deficit prompted forecasters to lower their GDP estimates. Oxford Economics estimated that trade subtracted 3.25 percentage points from third-quarter growth, while Pantheon Macroeconomics put the drag at four percentage points. Pantheon's Oliver Allen said growth "around 1% now seems more likely," acknowledging unusual uncertainty.

The trade data underscores a key dynamic: strong domestic investment, particularly in AI-related equipment, is boosting imports and thus weighing on net exports. Goldman Sachs (GS) economists forecast annualized increases of 3.4% in personal consumption and 10.2% in business fixed investment. Equipment investment has grown at a double-digit annualized rate for two consecutive quarters, with economists expecting a third. But because much of that equipment is imported, it doesn't contribute as much to GDP as the spending figures suggest. "Not everyone in America is participating" in the investment boom, cautioned FWDBONDS economist Christopher Rupkey.

The Federal Reserve, which held its policy rate steady on Wednesday, also sees stronger activity. Chair Kevin Warsh said the third quarter appeared to have brought a faster advance than the first half, but the Fed continued to describe inflation as elevated. Markets are anticipating a possible December rate hike, according to CNBC (VSNT), and strong GDP could reinforce expectations of tighter policy if inflation remains stubborn. The Wall Street Journal survey forecasts September PCE inflation at 3.7% year over year and core PCE at 3.1%; those figures are also due Thursday.

The report arrives just before the November 3 midterm elections, making growth and affordability particularly salient. A strong GDP number would provide favorable economic evidence for the administration, but it would not establish that any particular policy caused the improvement. Warsh said election considerations played no role in the Fed's decision.

Bessent's comment was not an official GDP result, and the exact timing and venue of his remark could not be independently verified. Treasury representatives did not respond to requests for comment.

Correction: An earlier version of this article incorrectly stated the date of the GDP release. It is scheduled for Thursday, October 29, not Wednesday, October 28.