BMO Capital Markets has revised its third quarter growth forecast in the United States by a full percentage point, from an estimated 2.8% to 3.8%.

This is a swing of four full percentage points from -1% in the second quarter, BMO notes.

“While this continues to be subpar growth in an economic recovery, it is far better than the consensus expectation not too long ago,” it adds.

The firm cites a number of factors for the more robust forecast, including an improving housing market, robust auto sales, the effect of fiscal stimulus measures, inventory rebuilding, and a variety of private sector spending incentives.

“None of this erases the still-dismal jobs picture or households’ need to build their much-eroded wealth. It’s just that the enormous liquidity poured into the economy, low interest rates and fiscal stimulants combine to push the growth outlook to stronger levels than once feared,” BMO says.

“It will still be a moderate long recovery period, but with no inflation worries for at least the next year, it could well be stronger than expected.”

IE