Even as the Federal Reserve prepares to announce its first rate cut in the current monetary policy cycle, some have expressed fears that the move could be a little too late to keep the economy from slipping into a recession. Market strategist and  President of Yardeni Research Ed Yardeni, however, allayed the concern.

What Happened: The Atlanta Federal Reserve’s GDPNow model revised the estimate for third-quarter real GDP growth from a seasonally adjusted annual rate of 2.5% to 3%. The growth pertains to the national economy. Yardeni noted that the upward revision was made following the release of solid August retail sales and industrial production reports.

The Commerce Department said Tuesday that retail sales rose 0.1% month-over-month in August compared to consensus expectations for a 0.2% drop. Auto sales edged down 0.1% but core retail sales excluding motor vehicle and parts dealers and gas stations rose a moderate 0.2%.

Separately, the Federal Reserve said industrial production rose 0.8% month-over-month in August, better than the 0.2% consensus forecast.

Yardeni noted that an upward revision in real consumer spending growth from 3.5% to a whopping 3.7% was primarily responsible for the upward adjustment to the GDPNow model. The increase in real spending on capital equipment was raised from 10.8% to 11.6%, he added.

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Why It’s Important: The two strong reports from Tuesday along with the August non-farm payroll gains confirm that the index of coincident economic indicators may have risen to yet another record in August, Yardeni said. The coincident economic index, calculated by the Conference Board, takes into account payroll employment, personal income less transfer payment, manufacturing and trade sales, and industrial production

The year-over-year growth rates of the coincident economic index and real GDP are highly correlated, he said, adding that “both are rising at a solid pace.”

This could be good news for the market as most strategists opine that the Fed rate cuts could prove more beneficial for the market if the economy holds up without slipping into a recession.

The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the performance of the S&P 500 Index, rose 0.14% to $563.84, according to Benzinga Pro data.

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