February 12, 2025 at a customer store in a HEB grocery store in Austin, Texas.
Brandon Bell | Getty Images
Early economic data for the first quarter of 2025 pointed to negative growth, according to the Atlanta Federal Reserve Bank.
Central Bank’s gdpnow According to an update released Friday morning, trackers for incoming metrics show that GDP has shrunk by 1.5% between January and March.
New indicators show that consumers spend less than expected time in January and weaker exports, which leads to a downgrade. Before Friday’s consumer spending report, GDPNOW showed a 2.3% increase in the quarter.
Although the volatility magnitude of the tracker is volatile and usually becomes a more reliable measure later in the quarter, it does coincide with some other measures that show slowing growth.
“Although this is an inherent volatility of the very high frequency ‘nowcast’ maintained by the Atlanta Fed,” Mohamed El-Erian, chief economic adviser for Arianz In the post On social media sites X.
The gauges pointed out that GDP grew by as high as 3.9% in early February, but since then, GDP growth has been declining as more data comes in.
On Friday, Ministry of Commerce report The individual spending fell 0.2% in January, and the estimate for lack of Dow Jones increased by 0.1%. After inflation-adjusted, expenditure fell by 0.5%. As a result, this reduces the expected contribution of the expected contribution to 1.3% based on GDPNOW calculations.
At the same time, the contribution of net exports fell from -0.41 percentage points to -3.7 percentage points.
The combination of data and its impact on growth prospects is Surveys show consumer confidence decline And worry about rising inflation. The Commerce Department also reported that the Fed’s inflation volume is biased towards a decline this month as the core personal consumption expenditure price index fell to 2.6%, down 0.3 percentage points from December.
This week also brought some news to the labor market Initial unemployment claim Reaching a level that was sustained higher in early October.
In addition, the bond market is also pricing under slow growth. The 3-month fiscal yield this week exceeded 10 years of notes Historically reliable recession indicators On the horizon from 12 to 18 months.
Economic and policy uncertainty leads to the ups and downs of this year For the stock market. The Dow Jones industrial average grew 2% in 2025 amid wild volatility in the turbulent news cycle.
“My feeling is that complacency that is gradually entering the asset market is about to be disrupted,” said Joseph Brusuelas, chief economist at RSM.
The market is increasingly confident that the Fed will respond this year with multiple cuts in interest rates. Traders in the Fed funding futures market increased their chances of reducing their chances of a quarter-point in June to 80% on Friday afternoon and increased the likelihood of three such cuts this year.
