The Atlanta Fed GDPNow forecast for Q3 has been raised to 3.1% from a previous 3.0%.
This adjustment reflects the seasonally adjusted annual rate of real GDP growth for the third quarter of 2025. Recent data from the US Bureau of Labor Statistics and the US Census Bureau contributed to this revision.
Increase In Nowcasts
There was an increase in the nowcasts of real personal consumption expenditures growth, from 2.1% to 2.3%. Real gross private domestic investment growth also rose from 6.0% to 6.2%.
However, these gains were slightly offset by a decrease in the contribution of net exports to GDP growth, which fell from 0.28 to 0.23 percentage points.
The initial estimates for this quarter started at 2.1% and reached a high of nearly 3.5%.
The next update for the GDPNow forecast is set for 16 September.
Recent Upward Revision
The recent upward revision in the third-quarter growth estimate to 3.1% suggests the economy remains robust, driven by strong consumer spending and business investment. This continued economic strength reduces the likelihood of an imminent Federal Reserve interest rate cut. Traders should therefore adjust strategies that were banking on a more sluggish economy forcing the Fed’s hand.
We are seeing this play out in the bond market, where yields are responding to the resilient data. For instance, the 10-year Treasury yield has firmed up to around 4.6%, reflecting expectations that borrowing costs will remain elevated. Looking at Fed funds futures, the market is now pricing in only a 30% chance of a rate cut by December 2025, a significant drop from the 50% odds we saw just a few weeks ago.
For equity derivatives, this creates a complex picture, as strong growth is offset by high interest rates. Implied volatility, as measured by the VIX, is holding steady around 17, suggesting uncertainty rather than outright fear. This environment may favor strategies like selling covered calls on existing stock positions or establishing iron condors, which profit from stocks trading within a defined range.
This situation feels reminiscent of the economic conditions we experienced back in 2023, when growth consistently surprised to the upside despite one of the most aggressive rate-hiking cycles in history. Back then, bets on a hard landing proved costly for many. This historical parallel suggests that buying deep out-of-the-money puts on broad market indices like the S&P 500 may be an inefficient use of capital in the coming weeks.
Given the strong economic footing and a hawkish Fed, the US dollar is also likely to find support. The Dollar Index (DXY) is testing its recent highs near 106.50, a level not seen since the spring. Options traders could consider bullish positions on the dollar against currencies whose central banks are signaling a more dovish stance.
