The US economy is signaling a slowdown in growth, with the Atlanta Fed’s GDPNow model estimating annualized growth of -2.8% for the current quarter, down from +2.3% last week. This decline is driven by soft manufacturing activity and a record-high $153 billion trade deficit in January.
However, these negative estimates are not without precedent. The New York Fed’s equivalent Nowcast real-time tracking model shows +2.9% annualized growth in Q1, while the Dallas Fed’s “weekly economic index” indicates +2.4%. Despite this, the Atlanta Fed’s GDPNow model is considered historically reliable.
A range of soft economic indicators have been weak, including consumer sentiment and retail sales, which has raised concerns about an impending recession. The impact of US President Donald Trump’s agenda, particularly trade protectionism and tariffs, as well as uncertainty over government spending and employment, is also being felt.
Markets are responding to these concerns, with the Nasdaq experiencing a 9% loss in 10 days and investors seeking safety in U.S. Treasuries. The wealth effect is also at play, with the top 10% of American households accounting for half of consumer spending and owning significant stocks.
Economists expect Trump’s agenda to weigh on the economy this year, but the impact may be more pronounced than initially thought. If growth continues to slow, it could lead to a rate cut by the Federal Reserve in the second quarter.
The term “Trumpcession” was coined due to the rapid and unexpected slowdown in economic growth, which may have been caused by the implementation of Trump’s spending and trade policies. The Federal Reserve’s rate-cutting cycle is on hold due to uncertainty surrounding these policies, but policymakers may now reconsider their stance.
Source: https://www.reuters.com/markets/europe/atlanta-fed-shock-sounds-trumpcession-warning-mcgeever-2025-03-03