Bloomberg Surveillance · Thursday, September 3, 2026
Michael Darda of Roth Capital argues that "private final sales," a measure of nominal GDP for the private sector focusing on consumption and investment, ran above a 9% pace in Q2 and are tracking high for Q3. He posits that if this underlying pace continues, the Federal Reserve is "way behind the curve" and needs to tighten monetary policy, though he notes a lack of momentum in nominal income proxies and declining real income growth due to energy shocks.
“So if we look at the private final sales, so it's nominal GDP for the private sector focusing on consumption and investment. we actually ran it just above a 9% pace in Q2. And the tracking estimates for the third quarter are very high. So inflation is expected to come down into the mid twos, but you know, it looks like we could print another huge quarter for real final sales, you know, even above 4%. So that would get you to about seven. And so if that's truly the underlying pace, then the Fed is way behind the curve and needs to tighten monetary policy.”
“But there's a crucial caveat here. We're not really seeing that momentum in the nominal or money income proxies. They've been much steadier. And we've seen a decline in real income growth because of the energy shock. Bond market inflation expectations that are forward-looking are not priced for a 7% to 9% economy.”
“So I think the fourth quarter of this year is going to be the tell. And, you know, we'll see whether the Fed raises rates before that.”