Economics

The first quarter is on track for negative GDP growth, Atlanta Fed indicator says

Published

2 months ago

February 28, 2025

Business Finance News

A customer shops for produce at an H-E-B grocery store on Feb. 12, 2025 in Austin, Texas.

Brandon Bell | Getty Images

Early economic data for the first quarter of 2025 is pointing towards negative growth, according to a Federal Reserve Bank of Atlanta measure.

The central bank’s GDPNow tracker of incoming metrics is indicating that gross domestic product is on pace to shrink by 1.5% for the January-through-March period, according to an update posted Friday morning.

Fresh indicators showed that consumers spent less than expected during the inclement January weather and exports were weak, which led to the downgrade. Prior to Friday’s consumer spending report, GDPNow had been indicating growth of 2.3% for the quarter.

While the tracker is volatile and typically becomes a more reliable measure much later in the quarter, it does coincide with some other measures that are showing a growth slowdown.

“This is sobering notwithstanding the inherent volatility of the very high frequency ‘nowcast’ maintained by the Atlanta Fed,” Mohamed El-Erian, chief economic advisor at Allianz and president of Queens’ College Cambridge, said in a post on social media site X.

The gauge had pointed to GDP gains as high as 3.9% in early February but has been on a decline since then as additional data has come in.

On Friday, the Commerce Department reported that personal spending fell 0.2% in January, missing the Dow Jones estimate for a 0.1% increase. Adjusted for inflation, spending fell 0.5%. As a result, that shaved a full percentage point off the expected contribution to GDP, down to 1.3%, according to the GDPNow calculation.

At the same time, the contribution of net exports tumbled from -0.41 percentage point to -3.7 percentage points.

The combination of data and its impact on the growth outlook comes with surveys showing decreasing consumer confidence and worries about rising inflation. The Commerce Department also reported that an inflation measure the Fed favors moved lower during the month, as the core personal consumption expenditures price index fell to 2.6%, down 0.3 percentage point from December.

The week also brought some concerning news out of the labor market as initial unemployment claims hit a level that was last higher in early October.

In addition, the bond market also has been pricing in slower growth. The 3-month Treasury yield this week moved above the 10-year note, a historically reliable indicator of a recession at the 12- to 18-month horizon.

The economic and policy uncertainty has led to a bumpy start to the year for the stock market. The Dow Jones Industrial Average is up 2% in 2025 amid wild fluctuations in a volatile news cycle.

“My sense is that the complacency that has crept into asset markets is about to be disrupted,” said Joseph Brusuelas, chief U.S. economist at RSM.

Markets increasingly believe the Fed will respond to the slowdown with multiple interest rate cuts this year. Traders in the fed funds futures market increased the odds of a quarter percentage point reduction in June to about 80% as of Friday afternoon and raised the possibility of three such cuts total this year.

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Economics

Trump tariffs could cause summer economic slump: Chicago Fed president

Published

1 day ago

April 20, 2025

Business Finance News

Austan Goolsbee, President and CEO of the Federal Reserve Bank of Chicago, speaks to the Economic Club of New York in New York City, U.S., April 10, 2025.

Brendan McDermid | Reuters

Business owners and CEOs are already stocking up on inventory, and some American shoppers are panic buying big-ticket items in anticipation of President Donald Trump’s tariffs. The sudden buying binge could cause an “artificially high” level of economic activity, said Federal Reserve Bank of Chicago President Austan Goolsbee.

“That kind of preemptive purchasing is probably even more pronounced on the business side,” Goolsbee told CBS’ “Face The Nation” on Sunday, adding: “We heard a lot about preemptive building-up of inventories that could last 60 days, 90 days, if there [was] going to be more uncertainty.”

Businesses stockpiling inventory and consumers accelerating their purchasing decisions — buying an Apple iPhone now, say, rather than waiting until the fall — may inflate U.S. economic activity in April and lead to a slowdown in the coming months, Goolsbee suggested.

“Activity might look artificially high in the initial, and then by the summer, might fall off — because people have bought it all,” he said.

Sectors affected by Trump’s tariffs, particularly the auto industry, are most likely to heavily stock up on inventory now before import levies on goods from other countries potentially rise further, said Goolsbee. Many car parts, electronic components and other big-ticket consumer items are manufactured in China, for example, which currently faces a 145% total tariff rate on goods imported to the United States.

Trump’s tariffs on a bevy of other countries are currently in the middle of a 90-day pause, with a 10% baseline tariff rate instead applying to all imported goods across the board. The pause is due to expire on July 9, with Trump touting a series of rate negotiations with foreign leaders between now and then.

“We don’t know, 90 days from now, when they’ve revisited the tariffs, we don’t know how big they’re going to be,” Goolsbee said.

Some U.S. business owners who buy goods manufactured in China say they already can’t afford to place rush orders on inventory. Matt Rollens, owner and CEO of Granite Bay, California-based novelty drinkware company Dragon Glassware, says he’s temporarily holding his products in China because paying the 145% levy would force him to raise consumer prices by at least 50%, likely drying up customer demand.

Rollens has enough inventory in the U.S. to last roughly until June, and hopes the tariffs will be rolled back by then, he told CNBC Make It on April 11.

Short-term uncertainty and financial pain aside, the Fed’s Goolsbee expressed optimism about the country’s longer-term economic outlook.

“If we can get through this, it’s important to remember: The hard data coming into April was pretty good. The unemployment rate [was] around steady full employment, inflation [was] coming down,” he said. “It’s just a desire of people expressing they don’t want to back to ’21 and ’22, at a time when inflation was really raging out of control.”

Economics

Donald Trump wants a certain kind of immigrant: the uber-rich

Published

1 day ago

April 20, 2025

Business Finance News

IN HIS LOVE of lucre Donald Trump can be crass. In their pursuit of efficiency, free marketeers can be, too. Consider the sale of citizenship. Most people dislike the idea of treating national belonging as a commodity. Yet about a dozen countries hawk passports and more than 60, including America, offer residency in exchange for an investment or donation. Its “golden-visa” scheme is cumbersome, under-priced and inefficient. On this point the president and the market agree.