Make recessions great again.
Sorry. That’s the worst kind of cheap, unimaginative punchline, which is to say the sort of “too obvious” humor I wouldn’t typically traffic in, but… well, it felt somehow obligatory.
How about MECA, instead? “Make expansions contractions again.”
On the heels of Thursday’s and Friday’s US macro data, the bottom fell out for Q1 GDP tracking on the Atlanta Fed’s widely-cited “nowcast.” What was a wholly respectable 2.3% running estimate of the real growth impulse for the current quarter took a veritable header into negative territory.
The figure shows you the evolution of the forecast, with each incremental input labeled. The high earlier this month was nearly 4%. We’ve gone from a blistering implied pace of expansion to now an implied contraction in the space of four weeks.
Remember: This model isn’t amenable to partisan critiques. There are exactly no subjective elements. It’s purely mathematical. Not that such a defense matters in a post-truth world, but I thought I’d put it out there for those you who still value your own sanity.
Note that blue chip consensus still expects the world’s largest economy to expand at a 2% annualized rate, give or take, in Q1. That may very well prove to be accurate. Indeed, I’d wager it’s far more likely than a contraction, to say nothing of a meaningful contraction like that tipped by the Atlanta Fed model.
The point here is just to underscore the fact that the data has turned demonstrably foreboding of late, and that the inflection’s now impacting GDP tracking. In that context, recall that the implied Q1 growth impulse from the flash read on S&P Global’s PMI release for February, which included a shock contraction on the services side, was just 0.6%.
According to both the University of Michigan survey and the Conference Board’s measure, American households and consumers are quite nervous in aggregate, and all “cold weather” cop-outs aside, that angst manifested in data covering everything from home sales in January to spending on goods and services.
Although equities rallied late Friday, the S&P was on track for its worst week of 2025, on the cusp of erasing a post-election rally which PMs and retail investors alike generally assumed was a precursor to another banner year for US shares.
It’s worth noting that despite the suddenly sour mood, positioning’s still lopsidedly bullish. “The narratives and moods are shifting way quicker than positions,” BofA’s Michael Hartnett remarked, adding that “investors are not short risk, nor long bonds.”
That doesn’t even account for the impending government shutdown or tariffs yet either.
Add all that to the embarrassing display by our President and VP today and you get an ugly, ugly picture of America. Where’s the bottom going to be?
It’s beginning to look like this time (T2) it might just be different. All the other guys have been watching the game films from the last time. Now they got it. This could be the Eagles pounding the Chiefs.
Exactly.
Can’t wait to hear your thoughts about this shit show in the Oval Office.
H, I’ve read that the swing is largely due to importers front running potential tarriffs (imports get subtracted, exports added to the calculation). Does this take have merit?
Perhaps. But the math is tricky because, as I recall, inventory builds are a positive in the calculations. Will one offset the other?? Paging Mr Lucky!
Then, on the other side of the coin, consumers are said to be pulling purchasing forward in anticipation of tariffs. In that narrative, consumption will weaken once that precautionary buying runs its course. It evokes consumer behavior when inflation goes vertical (Brazil 25 years ago & such) = buy now before prices go even higher.
But you know how much respect I have for economic models.
That is somwhat true, but it is not a downward push on these numbers.
H-Man, the last real recession was the 08-09 real estate debacle, Covid was a hiccup as far as recessions go in 2020 due to the Fed flooding the economy with cash. So maybe a real recession will show up in 25.