Fed nowcasts show U.S. Q2 growth at 2.7%–3.3%

Federal Reserve real-time models estimate U.S. second-quarter annualized GDP between 2.7% and 3.3%, up from a 1.6% gain in the first quarter. The New York Fed Staff Nowcast places growth at 2.7% while the Atlanta Fed’s GDPNow model estimates about 3.3%. The Bureau of Economic Analysis will publish the official GDP estimate in late July.

The June employment report recorded solid payroll gains following losses in February. Monthly payrolls have rebounded in recent months. The six-month moving average of job growth remains below the previous business cycle average.

Private fixed investment has expanded over recent years across structures, equipment and research and development. Investment tied to artificial intelligence projects has been a notable component and is increasingly directed toward hardware, industrial activity, electrical equipment manufacturing and upgrades to the energy grid.

Some investment forecasts project that recent capital spending could raise worker productivity and support output growth over the medium term. Analysts cite potential reductions in unit labor costs if output per worker increases.

Portfolio managers report a tilt toward U.S. equities with sector weightings favoring financials, industrials and information technology. In fixed income, managers say they have increased exposure to mortgage-backed securities, favored the middle portion of the yield curve and held high-quality asset-backed securities. A range of alternative allocations cited for income and inflation protection includes equity option overlay strategies and multi-asset real return strategies.

Market moves linked to geopolitical headlines have driven spikes in volatility. A cash indicator used by some firms has remained below its long-term median this year. Firms say fixed-income trading patterns have not triggered larger moves into cash.

Market participants will watch incoming economic releases and the BEA’s official GDP estimate at the end of July for confirmation of the nowcasts. For now, employment data and private investment account for much of the data feeding current growth estimates.