United States: Incoming growth signals continue to strengthen

Incoming US growth signals continued to strengthen this week, further raising upside risks for 3Q growth and lifting bond yields. Markets raised the probability of an October Fed hike to 64% from 53%, and the 10-year Treasury yield jumped another 16bp to 5.16%, with fed funds pricing near 5% by next September. Fed officials sounded broadly hawkish, with New York Fed President Williams saying "we still have a lot of work to do." The September all-industry PMI output measure hit 58.4, the highest since the post-COVID spike in 2021, consistent with around 5% GDP growth. On September 30 the BEA will publish the third release of 2Q GDP along with annual NIPA revisions and the August PCE report; we forecast revised 2Q real GDP growth of 1.7% q/q saar, with PCE deflator methodology updates lowering the over-year-ago core PCE rate by 15-20bp; we expect August core PCE up 0.25%m/m and about 3.3%oya. Next week we look for 100k payrolls, 4.1% unemployment, and 3.3% core PCE.