"Atlanta Fed's GDPNow: U.S. Economy Braces for 2.8% Contraction"
1min read The Atlanta Fed's GDPNow model has sparked concern with its latest prediction, forecasting a 2.8% contraction in the U.S. economy during the first quarter of 2023. This significant downturn, if realized, would mark the steepest decline since the COVID-19 lockdown in 2020 and could potentially signal the onset of a "Trumpcession," a term coined to describe a recession triggered by former President Trump's policies.
The model's projection stands in stark contrast to its estimate from just a month ago, which suggested a growth rate of nearly 4% for the same quarter. While GDP trackers can be volatile, several economic indicators support the downward trend. The U.S. recorded a record-high $153 billion trade deficit in January, a 25.6% increase from December, which may have contributed to the potential GDP fall. Additionally, consumer confidence plummeted in February, with the Conference Board's index dropping from 105.3 points to 98.3, the largest month-to-month decline since August 2021.
Consumer spending also fell by 0.2% in January, and billionaire investor Warren Buffett has expressed concerns about Trump's tariffs fueling inflation and hurting consumers. The recent slump in crypto prices, with Bitcoin (BTC) and Ether (ETH) down 10.2% and 21.6% respectively over the last two weeks, has also been attributed to macroeconomic concerns. Since Trump's inauguration on January 20, more than $670 billion has been wiped off the total crypto market cap.
However, not all GDP models share the Atlanta Fed's grim outlook. The Federal Reserve Bank of New York's model predicted a 2.9% increase for Q1 in its latest update, while the GDP tracker from the Federal Reserve of Dallas forecasted a 2.4% increase. The Atlanta Fed's GDPNow model mimics the methods used by the Bureau of Economic Analysis to estimate changes in GDP, while the New York model applies Bayesian estimation and filtering techniques to assess a broader range of data. The Federal Reserve of Dallas, on the other hand, places a greater emphasis on state-level data to gather a more localized perspective on economic growth.
As the U.S. economy faces potential headwinds, investors and policymakers alike will be closely monitoring the situation to assess the 