The Atlanta Fed's GDPNow model has revised the U.S. Q1 GDP growth forecast down from 2.3% to -1.5% (a 3.8 percentage point drop).
The Q1 PCE growth forecast has been lowered from 2.3% to 1.3%, while the net export contribution to GDP has been revised down to -3.70%.
Opinion
As the U.S. economy slows faster than expected, the likelihood of a Federal Reserve policy adjustment is increasing. In particular, the slowdown in consumer spending and the decline in net exports could negatively impact corporate earnings. With the Q1 earnings season approaching, it is crucial to reinforce risk management strategies.
Core Sell Point
With the U.S. economic slowdown becoming more evident, a cautious approach is necessary for cyclical sectors and consumer-related stocks.
The U.S. economic growth forecast for the first quarter has been sharply revised downward. The Atlanta Federal Reserve’s GDPNow model now projects a -1.5% growth rate, a significant 3.8 percentage point drop from the previous estimate of 2.3%. This downward revision has been ongoing since late January, raising growing concerns in the market about a potential recession.
The primary factors behind the declining growth rate are the slowdown in personal consumption expenditures (PCE) growth and a sharp drop in net exports. The real PCE growth rate for Q1 has been revised down from 2.3% to 1.3%, while the net export contribution to GDP has plummeted from -0.41 percentage points to -3.70 percentage points. Analysts attribute this to the anticipated tariff measures announced by President Trump, which have impacted market sentiment, leading to stagnating exports and rising imports.
While private sector economists surveyed in the Blue Chip Consensus still project a growth rate in the high-1% to mid-2% range, the GDPNow model’s influence on Federal Reserve policy decisions means investors should closely monitor upcoming economic data. Additionally, with about a month left in the first quarter, further forecast revisions remain a possibility.
