Growth Risk? The Atlanta Fed GDPNowcast data is showing Q3 currently trending at 3.6%, but that might not be the big story. Nearly 50% of the US economic growth can be tied directly or indirectly to data center construction. Although conditions are steady for the moment, moratoriums are holding up nearly $130B in new project starts and there is some growing risk that some projects may get postponed due to financing concerns. Still, other pockets of the economy are strong: consumer spending, manufacturing (especially durable goods), and health care. We estimate that $1.05T in consumer spending remains shifted from product consumption to services spending.
Bond Watch and Interest Rates. Most interest rates are set by Treasury yield rates. Interest rates on bonds have been surging since February (after the start of the conflict in the Middle East). Traders are sensitive to geopolitical unrest, deficits, and inflation and all three have been impacted by the conflict. Two critical thresholds still exist. At 5.5% on the US 10 Year Bond (by some estimates) interest rates begin to slow consumer spending, commercial borrowing and investment, and general economic activity. Despite easing through October 15th slightly, most analysts believe that they will continue to remain elevated. (....)