Atlanta Fed model sees 2.8pc US 1Q GDP drop

Market: Metals, Natural gas
04/03/25

A closely watched GDP forecasting model published by the Federal Reserve Bank of Atlanta estimates US gross domestic product (GDP) is on track to contract by an annualized 2.8pc in the first quarter of 2025.

The latest estimate published Monday was down from a 1.5pc first quarter decline published on 28 February. The Bureau of Economic Analysis (BEA) will release its "advance" estimate, the first of three, on first quarter GDP growth on 30 April.

The forecast for contraction comes as President Donald Trump has implemented or increased tariffs on major allies Canada, Mexico and the EU, as well as adversaries like China, begun mass layoffs in the federal government and frozen federal funding to many agencies. The moves are causing consumers and businesses to turn cautious as they evaluate the potential outcomes and threaten to upend supply chains and spur inflation.

US GDP expanded at an annual 2.3pc in the fourth quarter of 2024, down from 3.1pc in the third quarter. GDP last contracted in the first quarter of 2022, falling by 1pc, after contracting by 28pc in the second quarter of 2020 during the brief Covid-19-induced recession. A third, final estimate for fourth quarter GDP is due out on 27 March.

The latest GDPNow estimate was updated Monday after releases from the Institute for Supply Management and the US Census Bureau prompted the model to downgrade estimates for personal consumption and fixed investment for the quarter.

The GDPNow model "mimics" the models used by the BEA to estimate GDP growth, and aggregates statistical model forecasts of 13 subcomponents that comprise GDP. The latest GDPNow forecast is usually released hours after a report on a subcomponent is released, which usually comes every three to five days.

Upcoming reports that will be taken into consideration by GDPNow include international trade, retail sales, housing starts, industrial production and construction spending. The last GDPNow forecast will come the day of the last input report before the advance GDP data is released in April.

The GDPNow forecast for the first quarter fell to a contraction of 1.5pc on 28 February, on weak consumer spending and exports data, from a prior forecast for growth of 2.3pc two days earlier.

The Atlanta Fed says since it started tracking GDP growth with versions of the GDPNow model in 2011, the average absolute error of final GDPNow forecasts has been 0.77 percentage points.

By Bob Willis

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17/04/25

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Mexico City, 17 April (Argus) — The Mexican finance executive association (IMEF) lowered its 2025 GDP growth forecast for a second consecutive month in its April survey, citing a rising risk of recession on US-Mexico trade tensions. In its April survey, growth expectations for 2025 fell to 0.2pc, down from 0.6pc in March and 1pc in February. Nine of the 43 respondents projected negative growth — up from four in March, citing rising exposure to US tariffs that now affect "roughly half" of Mexico's exports. The group warned that the risk of recession will continue to rise until tariff negotiations are resolved, with the possibility of a US recession compounding the problem. As such, IMEF expects a contraction in the first quarter with high odds of continued negative growth in the second quarter — meeting one common definition of recession as two straight quarters of contraction. Mexico's economy decelerated in the fourth quarter of 2024 to an annualized rate of 0.5pc from 1.7pc the previous quarter, the slowest expansion since the first quarter of 2021, according to statistics agency data. Mexico's statistics agency Inegi will release its first estimate for first quarter GDP growth on April 30. "A recession is now very likely," said IMEF's director of economic studies Victor Herrera. "Some sectors, like construction, are already struggling — and it's just a matter of time before it spreads." The severity of the downturn will depend on how quickly trade tensions ease and whether the US-Mexico-Canada (USMCA) free trade agreement is successfully revised, Herrera added. But the outlook remains uncertain, with mixed signals this week — including a possible pause on auto tariffs and fresh warnings of new tariffs on key food exports like tomatoes. IMEF also trimmed its 2026 GDP forecast to 1.5pc from 1.6pc, citing persistent tariff uncertainty. Its 2025 formal job creation estimate dropped to 220,000 from 280,000 in March. The group slightly lowered its 2025 inflation forecast to 3.8pc from 3.9pc, noting current consumer price index should allow the central bank to continue the current rate cut cycle to lower its target interest rate to 8pc by year-end from 9pc. IMEF expects the peso to end the year at Ps20.90/$1, slightly stronger than the Ps21/$1 forecast in March. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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17/04/25

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17/04/25

India's ONGC wins 15 blocks in upstream oil, gas bid

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17/04/25

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17/04/25

Taiwan poised to import more LNG this summer

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Cyclones disrupt BHP iron ore sales in January-March

17/04/25

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17/04/25

Cyclones disrupt BHP iron ore sales in January-March

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