Atlanta Fed model sees 2.8pc US 1Q GDP drop

Spanish 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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Brazil's CSN expects flat steel, upside ahead

09/05/25

Brazil's CSN expects flat steel, upside ahead

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09/05/25

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Brazil's inflation accelerates to 5.53pc in April

09/05/25

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Q&A: US' ACE Green bets on LFP batteries

09/05/25

Q&A: US' ACE Green bets on LFP batteries

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