Customers will shop for produce at Heb’s grocery store in Austin, Texas on February 12, 2025.
Brandon Bell | Getty Images
According to measures by the Federal Reserve Bank of Atlanta, economic data early in the first quarter of 2025 points to negative growth.
According to an update posted on Friday morning, the central bank’s GDPNOW tracker shows that gross domestic product has been shrinking by 1.5% for the period from January to March.
Fresh indicators showed that consumers spent less than expected between the bad weather and exports in January, which led to downgrades. Prior to Friday’s consumer spending report, GDPNOW showed quarterly growth of 2.3%.
Trackers are volatile and usually a much more reliable measure that is much later than the quarter, but are consistent with other measures indicating slowing growth.
“This is calming despite the inherent volatility of the very high frequency “Nowcast” that the Atlanta Fed maintains,” Mohamed El-Erian, Chief Economic Adviser at Allianz and president of Queen’s College Cambridge, said in a post on social media site X.
Gauge pointed out that GDP profits would be 3.9% in early February, but has since declined due to additional data.
On Friday, the Commerce Department reported that personal spending fell 0.2% in January and Dow Jones estimates increased by 0.1%. Adjusted for inflation, spending fell by 0.5%. As a result, according to GDPNOW calculations, we reduced the full percentage point to 1.3% from our expected contribution to GDP.
At the same time, net export contributions fell from -0.41% points to -3.7% points.
The data combination and impact on growth outlook comes with research showing concerns about declining consumer confidence and increased inflation. The Commerce Department also reported that Inflation Measure reduced the Fed’s favor to the month as the core personal consumption price index fell 0.3 percentage points from December.
The week also brought some news about the labour market as the first unemployment claim reached its last rise in early October.
Furthermore, the bond market is priced due to slow growth. Treasury yields for three months this week have moved beyond the 10-year notes, a historically reliable indicator of a recession on the horizon for 12-18 months.
Economic and policy uncertainty has led to a bumpy start to the stock market this year. The Dow Jones industrial average has risen 2% in 2025 amid the wild volatility of the volatile news cycle.
“My feeling is that the self-satisfaction that has crept into the asset market is about to be confused,” said Joseph Brussieras, chief US economist at RSM.
The market increasingly believes the Fed will respond to the slowdown with multiple interest rate cuts this year. Traders in the Fed fund futures market increased the odds of a quarter-point cut in June to about 80% as of Friday afternoon, increasing the chances of three total cuts this year.
