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The Trump Recession is Looking More Likely -- Latest GDP Now-cast from Atlanta Fed: -2.1% in Q1 [1]
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Date: 2025-03-17
Here’s the link to the latest now-cast for Q1 GDP growth from the Atlanta Fed researchers: www.atlantafed.org/…
And here is their statement:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.1 percent on March 17, down from -1.6 percent on March 7. After this morning’s retail sales release, the nowcast for first-quarter real personal consumption expenditures growth declined from 1.1 percent to 0.4 percent. Due to FOMC blackout policy, today’s post does not include an update of the version of the model described here that adjusts the standard GDPNow model forecast for foreign trade in gold. That adjusted model will again be updated after our first scheduled post-blackout update on March 26.
Note there’s a caveat in their statement, which implies that some of the negative forecast may be due to a surge in gold imports in January. Since those imports may intended for as a store of wealth rather than for production, it’s likely that the Bureau of Economic Analysis will NOT include them in the official GDP estimates later. Thus, the GDPnow model may be exaggerating the potential downturn, in effect, by potentially overstating January imports.
However, I think there may an offsetting crash in federal and state and local purchases of goods and services in March. Lots of federal contracts are still frozen up, and state budgets are headed for tough time.
Remember the old GDP model: GDP = C + I + G + Net Exports (Exports less Imports). The GDPnow team is hinting that final estimates of Q1 imports (a drag on GDP) may not be as bad as the model currently predicts, due to that adjustment for gold imports not being intended for production of goods and services.
However, that “G” in the equation looks pretty bad to me, possibly worse than GDPnow currently knows. Maybe that frozen up government spending will show more in Q2 than Q1, but I think it’s in the pipeline.
Even worse, note the downward revision of “C,” personal consumption expenditures. That’s the biggest component of GDP.
Note also that the shaded “Blue Chip” consensus (which my former forecasting group used to be part of!) is starting to trend down as well. I expect further downward revisions as the herd follows the leader.
I’ll be back after about 3pm EDT to check on comments and questions if any!
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