While the third quarter growth is expected to be well below the first half, inflation remains the biggest risk.

The wealth of data released last week provided evidence of a slower growth rate in the third quarter than the first half of this year. Our forecast now calls for Real GDP growth of 4.1% as compared to the 6.7% increase reported for the second quarter. The lower growth rate is due to only a 1% growth in personal consumption expenditures as compared to the 12% growth in the second quarter. The lower level of consumer spending was mainly in the service sector as the surge in the virus caused many not to travel or go out to eat. Consumer Confidence as measured by the Conference Board declined by more than 5% during the month.