In the third quarter of this year, the USA economy seems unstoppable and has dodged another 'bullet'.

According to market forecasts, the data to be released by the USA Department of Commerce on Wednesday is expected to show that, adjusted for seasonality and inflation, the Gross Domestic Product (GDP) in the third quarter is expected to grow at a strong pace of 3% annualized, unchanged from the previous value. If this expectation materializes, it would mark the USA economy's 10th consecutive quarter of expansion.

At the same time, the market also expects this report to show a significant slowdown in the core PCE price index in the third quarter from the previous value of 2.8% to 2.1%, close to the Federal Reserve's 2% inflation target. The Federal Reserve uses the PCE price index included in GDP estimates as its main inflation indicator.

Therefore, this report should indicate that the USA economy is robust, inflation is easing, and at least somewhat alleviated compared to a year ago. Oliver Allen, senior US economist at Pantheon Macroeconomics, wrote in the report, 'The slowdown in economic growth that we and many others have been expecting apparently has not materialized.'

So, is everything really fine with the USA economy? Perhaps not. Allen added, 'The strong momentum in recent economic growth seems increasingly unsustainable.'

In what could be the most unpopular economic recovery in history, people continue to worry about whether the USA can rely on sustained consumer spending to maintain growth amidst worsening credit concerns and seemingly slowing hiring pace. Most importantly, some economists express concerns that inflation may rise again next year based on election results.

Allen believes that the period from July to September this year will mark the last significant growth in USA GDP data. While he does not think the economy will collapse, he forecasts growth to be close to a meager 1.5% by 2025. Allen wrote, 'Deteriorating growth prospects will trigger a more pronounced loss of momentum in the labor market, leading to a faster-than-expected rise in the unemployment rate compared to what the Federal Reserve anticipates. Therefore, we expect the Federal Reserve to ease monetary policy faster and to a greater extent than what most investors and commentators currently expect.'

Another driving factor for the Fed's interest rate cut is inflation, and the core PCE price index in the second quarter is likely to get closer to the Fed's target.

In fact, Citigroup expects the US GDP growth rate to be lower than expected, at only 2.6%, but expects the inflation indicators for the quarter to reach the 2% target. This figure may help solidify Fed officials' decision to only cut rates by 25 basis points next week. Citigroup economist Alice Zheng wrote:

"Factors driving down inflation come not only from falling commodity prices, but also from easing service inflation. Overall, another above-trend economic growth and benign inflation data will be welcomed by the Fed."

Editor/Somer