Atlanta Fed Nearly Doubles Q4 Growth Estimate To 5.4% After Strong Data

The U.S. economic outlook received a boost as the Atlanta Fed almost doubled its fourth-quarter GDP estimate to 5.4%. This surge was driven by stronger trade data, particularly a shrinking trade deficit. The report indicates that the trade deficit is at its lowest level in sixteen years. Consumer spending also showed modest strengthening, contributing to the positive revision. Additionally, the Institute for Supply Management data revealed strengthening service-sector activity in December. Fitch Ratings also raised its growth forecasts for 2025 and 2026 due to stronger-than-expected economic momentum. Fitch expects 2.1% GDP growth in 2025 and 2.0% in 2026. Consumption, government spending, and net trade surprised positively in the third quarter. While investment was mixed, IT investment remained remarkably strong. Fitch expects inflation to remerge in 2026, reaching 3.2%, and the Fed to cut interest rates twice in the first half of 2026. Finally, the Congressional Budget Office projected steady but moderating growth in the coming years.