The Atlanta Federal Reserve's GDPNow forecast model has dramatically revised its first-quarter 2025 economic growth projection, plummeting to -1.5% from a previous estimate of +2.3% just one week ago. This marks one of the steepest declines ever recorded in the index.
The stunning reversal stems from two main factors. The trade deficit expanded substantially to $153 billion from $122 billion, with imports surging as businesses appear to be stockpiling inventory and rushing orders ahead of potential tariff changes. This pushed the net exports' contribution to GDP growth down sharply from -0.41 to -3.70 percentage points.
Additionally, consumer spending estimates were cut, with projected real personal consumption expenditure growth dropping from 2.3% to 1.3%. The residential sector also faces headwinds, as evidenced by Home Depot's cautious guidance and record-low pending home sales numbers.
However, economic analysts note that it's still early in the quarterly data cycle, suggesting these preliminary figures could shift substantially as more information becomes available. The dramatic swing in the forecast highlights the current uncertainty surrounding the U.S. economic outlook.
The GDPNow model, while respected as a real-time tracker, represents just one perspective on economic growth. As more data emerges throughout the quarter, the forecast will likely undergo further revisions before the official GDP numbers are released.