Yves here. While alarmism is entertaining, it can also be fully warranted. We’d seen some economic oriented sites comment on how the Atlanta Fed’s typically pretty accurate NowCast was sending recession warnings. But until we say the chart in the post below, we had no idea how severe the downward reading was. Yikes!
The chart below also makes clear that the Atlanta Fed forecast is an outlier. But consensus views are often wrong at inflection points. Remember the how finance talking heads were saying in 2007 that we were in a Goldilocks economy? That the Fed was engineering a soft landing?
Keep in mind that this result is entirely plausible given how Trump is creating radical uncertainty and job insecurity. It’s not just those directly defenestrated by DOGE but also those concerns and individuals that benefited from programs being whacked or cut back. And it may not be direct cash but depending on program services. So not only to we have volatility, which businessmen who are not professional financial speculators hate, but be also have demand reduction. That does normally equate to some degree of slowdown.
On top of that, the Trump tariffs look set to increase inflation. So we could wind up in serious stagflationary terrain.
The other issue is that if things turn out to be this bad, you can be sure the Trump Administration will do everything it can to massage the data to hide that (much easier to do when the graybeards have been DOGE-defenestrated and those left are afraid of being next). The first place to look would be the GDP deflator, but there are plenty of other tricks.
I recall one quarter, no long after the dot-bomb hit, that the initial GDP release was something like 2.2%. That was so out of whack with everything that I was reading and hearing that I must have called 20 people across the US and different industries (including investors who also did a lot of real economy tire-kicking) sputtering about where did this figure come from? Were they seeing any meaningful growth? No one reported on any hidden sectors or even pockets of strength.
The final GDP print for that quarter was 0.4%. So there is a proud tradition for this sort of thing even in a nominally growing economy.
By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published at Fund the Future
I am grateful to Dr Tim Rideout for drawing my attention to the GDP Now forecast run by the Atlanta Fed in the USA.
As they say of this:
The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. Our GDPNow forecasting model provides a “nowcast” of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.
GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter.
This is their latest forecast:
They say of this:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.8 percent on March 3, down from -1.5 percent on February 28. After this morning’s releases from the US Census Bureau and the Institute for Supply Management, the nowcast of first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 1.3 percent and 3.5 percent, respectively, to 0.0 percent and 0.1 percent.
The obvious question to ask in response is, might the US be about to fall off an economic cliff? It would seem it is entirely possible that this is the case. So much for Making America Great Again. It would seem that the plan is about Making American Chaos Again.
