U.S. GDP Growth on Track for Negative First Quarter, Atlanta Fed Indicator Says
The central bank's GDPNow tracker is indicating that gross domestic product is on pace to shrink by 1.5% for the January-through-March period, according to a Federal Reserve Bank of Atlanta measure. Early economic data for the first quarter of 2025 is pointing towards negative growth, with consumers spending less than expected during inclement January weather and exports being weak. The downgrade coincides with some other measures showing a growth slowdown.
This downgraded forecast raises questions about whether policymakers' expectations are too high, given the current trend in consumer confidence and rising inflation concerns.
How will monetary policy adjustments by the Fed respond to this growth slowdown, and what impact might these rate cuts have on the overall economy?
Weaker-than-expected data has led to a decline in US economic growth forecasts, with some economists now predicting a slower pace of growth than initially thought. The Atlanta Fed's GDPNow tool projects a 2.8% decline in the first quarter, down from a previous projection of a 1.5% decline. Uncertainty around President Trump's tariff policy appears to be weighing on business activity, particularly in the manufacturing sector.
This weakening economic outlook underscores the vulnerability of global supply chains, where timely delivery of parts is crucial for meeting production goals, and may signal a more prolonged period of economic uncertainty.
Will policymakers respond to the growing concerns about trade tensions with aggressive monetary easing or fiscal stimulus, potentially alleviating some pressure on business investment and consumer spending?
The Atlanta Fed's GDPNow model has signaled a concerning -2.8% growth estimate for the current quarter, a stark decline from previous projections and the fastest contraction since the pandemic lockdown. This drop is attributed to a combination of a record-high trade deficit and weakening manufacturing activity, reflecting broader economic uncertainties tied to President Trump's policies. As consumer sentiment falters and market indicators flash warning signs, the potential for a "Trumpcession" looms, raising questions about the Federal Reserve's next steps.
This unexpected economic downturn highlights the fragility of recovery in the face of political and trade-related uncertainties, suggesting that policy decisions carry significant weight in shaping real economic outcomes.
In what ways might the evolving economic landscape influence voter sentiment and policy priorities leading up to the next election cycle?
The S&P 500 is experiencing a modest recovery from its year-long slump, with stocks turning higher in early Friday trading as investors breathe a sigh of relief over the potential for inflation relief. The Atlanta Fed's GDPNow forecaster has revised its estimate of first-quarter GDP growth to a 1.5% decline, down from its prior estimate of a 2.3% advance, and Treasury yields have retreated amid President Trump's renewed tariff threats. The market is now looking to close out a difficult month with some modest index gains.
This rally highlights the complex relationship between economic data and investor sentiment, where seemingly positive news can be overshadowed by lingering fears about growth and policy uncertainty.
How will the sustained impact of inflation on consumer spending power and overall economic growth shape the Federal Reserve's monetary policy decisions in the coming quarters?
U.S. consumer spending unexpectedly fell in January, dropping 0.2% last month after an upwardly revised 0.8% increase in December. A pick-up in inflation could provide cover for the Federal Reserve to delay cutting interest rates for some time. The economy's slowdown, fueled by fading front-running gains and winter storms, is consistent with expectations for a sluggish economic growth rate in the first quarter.
The decline in consumer spending highlights the vulnerability of the U.S. economy to external shocks, such as weather events and trade policies, which can have far-reaching impacts on business confidence and investment decisions.
How will the ongoing inflationary pressures, fueled by President Trump's tariffs and spending cuts, influence the trajectory of monetary policy and the overall health of the U.S. consumer market?
Any rebound in the S&P 500 Index is likely to prove temporary amid concerns about the US economy, according to Goldman Sachs Group Inc. strategists. The market has faltered this year on worries about lofty valuations for the technology behemoths. Investors have also questioned if President Donald Trump's America-First policies are likely to stoke inflation and lead to a slowing economy.
This outlook suggests that the ongoing debate over the impact of inflationary policies on economic growth may be more nuanced than previously thought, with implications for investors seeking stable returns.
How will policymakers' efforts to balance inflation concerns with economic stimulus packages shape the trajectory of US stock markets in 2025?
Stocks have struggled to start 2025, with disappointing economic data and fears over President Trump's tariffs weighing on investors. Recent corporate earnings growth has been unable to lift stocks out of their slump, with the S&P 500 essentially flat on the year and about 5% off its all-time high. Strategists argue that a rebound in the economic growth story is key to reversing the recent equity market weakness.
The recent market sell-off highlights the fragility of investor confidence when faced with uncertainty, underscoring the need for policymakers to provide clarity on their plans.
Can a significant improvement in US economic growth data overcome the lingering concerns about President Trump's trade policies and restore investor optimism?
The S&P 500 and Nasdaq Composite fell on Friday with investors waiting for the release of the Federal Reserve's preferred inflation gauge as they eyed Trump’s latest trade threats. The Dow Jones Industrial Average added 0.2%. Investors are bracing for a sharp weekly and monthly loss in February after suffering from tariff moves.
As markets struggle to regain footing amidst uncertainty, it's crucial to examine whether there's an opportunity for growth in the long term or if investors need to be more cautious with their strategies.
Will the recent economic data provide sufficient guidance for policymakers to make informed decisions about future interest rate hikes?
Market sentiment has shifted as investors now anticipate three Federal Reserve interest rate cuts in 2025, primarily driven by increasing fears of an economic slowdown. Despite the traditional view that lower borrowing costs would boost market confidence, recent data indicating declines in consumer spending and retail sales have led to a slump in stock prices, including a significant drop in the small-cap Russell 2000 index. Analysts suggest that the current context of potential rate cuts, linked to weakening economic indicators, is perceived as a negative signal for market recovery.
This evolving narrative demonstrates how the relationship between monetary policy and market performance is becoming increasingly complex, with investors reassessing their strategies in light of economic realities.
What strategies should investors adopt to navigate a market landscape where rate cuts are viewed with skepticism?
U.S. economic activity has shown a slight uptick since mid-January, although growth remains uneven across regions, with some districts reporting stagnation or contraction. The Federal Reserve's Beige Book highlights rising uncertainty among businesses regarding the impact of President Trump's tariff policies and immigration plans on future growth and labor demand. Amid these concerns, expectations for economic activity remain cautiously optimistic, despite warnings of potential inflation and slower growth.
The juxtaposition of slight economic growth against a backdrop of rising tariffs and uncertainty reflects the complex and often contradictory nature of modern economic dynamics, where optimism can coexist with caution.
How will the evolving trade policies and their implications for inflation influence consumer behavior and business investment in the near future?
The US trade deficit in goods widened sharply in January, most likely as businesses front-loaded imports ahead of tariffs, potentially positioning trade to be a drag on economic growth in the first quarter. The goods trade gap surged 25.6% to $153.3 billion last month, while exports rose 2.0% to $172.2 billion. This increase in imports could have significant implications for the overall health of the US economy and global trade dynamics.
The surge in imports ahead of tariffs highlights the need for businesses to adapt to changing trade policies, potentially leading to a shift in supply chain strategies and investment decisions.
How will the widening trade deficit impact the long-term competitiveness of US industries, particularly those heavily reliant on imported goods and services?
The US dollar declined to multi-month lows against major currencies following weaker-than-expected job growth in February, as the Federal Reserve is likely to cut interest rates multiple times this year. The decline was accompanied by a boost for the euro, which is poised for its best weekly gain in 16 years. Fed Chair Jerome Powell repeated comments that the central bank will be cautious in responding to economic changes.
The softening labor market may provide some relief to the Federal Reserve as it evaluates inflationary pressures, but the uncertainty surrounding trade and tariff policies remains a concern.
How will the ongoing trade tensions between the US and other countries impact the dollar's value in the coming months?
The Federal Reserve could restart cuts to short-term borrowing rates in June and follow up with another reduction in September, traders bet on Friday, after data showed inflation edged down in January. The 12-month change in the personal consumption expenditures price index, which the Fed targets at 2%, ticked down to 2.5% last month from 2.6% in December. This modest slowdown could lead to a shift in the Fed's policy priorities, as policymakers weigh the trade-offs between controlling inflation and supporting economic growth.
As inflation rates begin to ease, what implications will this have for consumer spending habits, which are increasingly influenced by price sensitivity?
How might the Federal Reserve's response to easing inflation rates impact its long-term goals of full employment, particularly in a labor market where unemployment remains below pre-pandemic levels?
The US dollar has experienced its most significant drop since President Trump took office, largely due to concerns that recently imposed tariffs will negatively impact the economy. This downturn, particularly against the euro, is accentuated by expectations of monetary easing from the Federal Reserve as the potential for a global trade war looms. Additionally, Germany's plans for increased defense and infrastructure spending have contributed to the euro's strength, further pressuring the dollar.
The situation highlights the intricate relationship between trade policies and currency valuation, where tariffs intended to protect domestic interests may inadvertently weaken national currency strength.
What strategies might the Federal Reserve consider to stabilize the dollar in an environment of increasing global trade tensions?
US stocks are at risk of slumping another 5% on worries about the hit to corporate earnings from tariffs and lower fiscal spending, according to Morgan Stanley’s Michael Wilson. The strategist expects the S&P 500 (^GSPC) to hit a low of about 5,500 points in the first half of the year, before recovering to 6,500 by end-2025. His year-end target implies a rally of 13% from current levels.
This bearish outlook highlights the fragility of market sentiment when faced with uncertainty around growth and inflation, underscoring the importance of staying informed on macroeconomic trends.
How will the prolonged period of low growth expectations impact the long-term investment strategies and portfolio allocations of individual investors and institutional clients?
Trump's tariffs are set to hit the US economy at what appeared to be a challenging time even without new costs for businesses and consumers. The president said Monday that Tuesday night "WILL BE BIG," with the economy undoubtedly a major focus. Ahead of these expected tariffs, stocks got crushed on Monday. Economic growth forecasts have tumbled in recent days, as Yahoo Finance's Josh Schafer writes, highlighted by the Atlanta Fed's GDPNow model projecting -2.8% GDP growth for the first quarter.
The timing of Trump's latest tariff moves could be seen as a calculated gamble, but it's unclear whether the US economy can absorb the shock without sparking a broader economic downturn.
How will the global response to these tariffs affect the already fragile supply chains and international trade relationships that have been impacted by the pandemic?
The US labor market added 151,000 jobs in February, just below expectations, while the unemployment rate inched up to 4.1%. Economists largely read the report as better-than-feared, given other signs of economic growth slowing. However, the looming question for markets remains when the Federal Reserve will actually cut rates again.
The uncertainty surrounding future Fed actions could have a ripple effect on investor sentiment and market volatility, potentially influencing the trajectory of the US economy.
Will the inflation data reveal a sharp acceleration in price increases due to President Trump's tariffs, sending shockwaves through the global economy?
The stock market capped off a rough February, leaving some on Wall Street expecting investors to grow more defensive in the weeks and months ahead. A choppy month was punctuated by poor readings on consumer confidence, soft reports on consumer spending, and a sell-off across many of the momentum trades that had defined the market action this year. The fear among investors now is that the economy could be slowing down faster than the Fed is willing to react, which is a tough situation.
This growing sentiment reflects a broader trend in financial markets where risk aversion is on the rise, potentially leading to a more cautious approach to investing and a shift towards defensive strategies.
How will the increasing uncertainty around economic growth impact the asset allocation decisions of individual investors and institutional investors, and what implications might this have for the overall performance of various asset classes?
US stocks continued their downward trend, with the Dow Jones Industrial Average falling 0.8%, the S&P 500 dropping 1.3%, and the Nasdaq plummeting nearly 2% as investors digested concerns over the health of the US economy and President Trump's unpredictable trade policy. The market's woes were further exacerbated by worries about a potential recession, with Trump describing the economy as undergoing "a period of transition." As the political uncertainty persists, key economic data releases will be closely watched, including updates on inflation and corporate earnings.
This selloff in major US indexes reflects a broader concern that the economic growth slowdown may be more persistent than initially anticipated, which could have far-reaching implications for investors worldwide.
What are the potential policy implications of Trump's trade policies on the global economy, particularly if his administration continues to pursue protectionist measures?
The upcoming week will be crucial for investors as they await the February jobs report, retail earnings from major companies, and a new round of tariffs set to take effect. The employment situation is expected to show modest hiring last month while the unemployment rate remains steady at 4%. The state of consumer confidence, however, may be telling a different story, with initial jobless claims reaching their highest level of the year.
This week's jobs report and retail earnings could serve as a gauge for whether the US economy is indeed starting to slow down, marking a potential end to the era of near-full employment that has characterized the past decade.
As investors await clarity on the state of consumer spending and economic growth, will the Federal Reserve's next meeting be enough to restore confidence in the market, or will it only exacerbate concerns about a potential recession?
Interest rates have fallen to their lowest level of the year, but that hasn't given stocks much of a boost. The benchmark 10-year Treasury yield has declined since the start of the year, hovering around 4.3%, which in theory should give more juice to the stock market. However, the S&P 500 has sputtered, barely trading in the green since the start of the year, while previously reliable "Magnificent Seven" players have largely lagged the broader indexes.
The decline in interest rates may be a symptom of a deeper economic anxiety, as investors are increasingly concerned about the impact of tariffs and trade policies on growth and inflation.
Will the Federal Reserve's response to these concerns – cutting interest rates or tightening monetary policy – ultimately exacerbate the stock market's struggles, or find a way to revive investor confidence?
Wall Street's main stock indexes declined on Monday, reversing premarket gains after data showed that new orders at U.S. factories fell in February, suggesting concerns that President Donald Trump's tariffs could pressure production. The ISM survey showed manufacturing was steady in February, but a measure tracking forward-looking new orders contracted to 48.6 last month from 55.1 in January. Recent reports of softening consumer demand have spurred fears of a slowdown as markets prepare for higher inflation once the Trump administration's tariff policies take full effect.
The decline in new orders at U.S. factories could be a harbinger of economic weakness, particularly if the tariffs imposed by President Trump's administration are not lifted or reduced.
How will the ongoing trade tensions with China impact the global economy and the stock market in the coming months?
J.P.Morgan and Goldman Sachs have revised their forecasts for the euro area's economic growth, increasing the projected growth rate to 0.8% in 2025 due to Germany's fiscal loosening reforms. The European Central Bank (ECB) has also lowered its deposit rate to 2.5%, but warned of "phenomenal uncertainty" that could impact policy easing. However, JPM economists caution that uncertainty from Trump's tariff policy and potential US tariffs on European goods could weigh on economic growth in the coming months.
The revision highlights the interconnectedness of global economies, where a country's fiscal policies can have far-reaching effects on neighboring countries' growth prospects.
Will this revised forecast lead to a shift in monetary policies across Europe, potentially influencing the interest rates and borrowing costs for businesses and consumers?
Traders are increasingly betting on interest-rate cuts from the Federal Reserve due to concerns about the impact of US trade tariffs on global economic growth. The imposition of new tariffs on Canada, Mexico, and China has sparked worries that the US economy may be slowing down. Market participants are now pricing in three quarter-point rate cuts by 2025, marking a significant shift in expectations.
As markets adjust to the reality of tariffs, they are also beginning to question the true cost of protectionism: will the benefits of higher tariffs outweigh the costs of a slower-growing economy?
What role will the Fed's response play in shaping the global economic landscape as trade tensions escalate and central banks grapple with the implications?
A string of recent US data showing resurgent inflation and slowing activity is stoking fears the world’s biggest economy could be heading toward a period of stagflation. Economists caution against making too much of one month’s data, especially when skewed by factors like freezing weather. The Federal Reserve would face a tough choice between supporting the labor market or finishing its years-long inflation fight.
The rising concerns about stagflation could have far-reaching implications for monetary policy, potentially leading to a more nuanced approach that balances economic growth with inflation control.
As policymakers grapple with the risks of stagflation, they must also consider how to address the underlying drivers of inflation, such as supply chain disruptions and labor market changes.
The US economy added 151,000 jobs in February, but federal employment dropped by 10,000, showing that President Trump's policy changes are starting to impact hiring. The labor market remains strong, with the unemployment rate ticking up to 4.1%, but analysts warn that the growth may be cooling down due to economic uncertainty. The government's reduction of jobs and spending is being offset by gains in other sectors, such as healthcare and financial firms.
The ongoing policy changes under Trump's administration are testing the resilience of the US labor market, which has previously been a strong indicator of economic health.
As the government continues to reduce its workforce and spending, will these cuts ultimately lead to a decline in job growth and higher unemployment rates?