Accounting for gold, GDPNow for Q1 is at +0.4%.
Figure 1: GDP (black), GDPNow (red triangle), GDPNow adjusted for gold imports by Atlanta Fed (brown square), NY Fed (blue square), Goldman Sachs (inverted green triangle), Survey of Professional Forecasters (light blue), all in billion Ch.2017$ SAAR. Source: BEA, Atlanta Fed, Philadelphia Fed, NY Fed, Goldman Sachs and authors calculations.
Here’s the worksheet:
Source: Higgins/Atlanta Fed.
In the space of one week, the nowcast has declined by almost 2 percentage points (q/q annualized).
I am a little skeptical of the GDPnow estimate this quarter. I suspect it is being influenced by significant unresolved seasonality.
If you look at real personal consumption since the pandemic, in 2021 through 2023 the biggest monthly increases were all in January, with the exception of the March 2021 stimulus month, and the biggest monthly decreases were in November or December of the previous year.
The situation reversed in 2024 and this year, with big increases in the previous December and big decreases in January.
I went back and looked at GDPnow for Q1 of last year, and it did have a big decline in late February from 3% to 2%. I can’t tell whether or not that was due to the poor personal spending report for January. By the time the March data was released, the downdraft had disappeared.
I suspect the truer signal is given by averaging December and January, which was +.2% last year and +.1% this year. Of course, this year we also have the tariff frontrunning situation, which makes it even more complicated. But to cut to the chase, I expect much of the free fall in GDPnow will be reversed by the time we get to the actual GDP report.
Volatility in economic data has generally been higher in economic data in the current expansion than in the prior one. Covid messed with activity, as did government transfer programs and shitdowns when they began and ended. In the process, seasonal adjustment had a lot less to do with seasons and a lot more to do with Covid and the Covid response.
It’s rather quaint so see a seasonal mismatch as the result of weather.
Economist Kevin Hassett today: “I can tell you that in the situation room I’ve seen photographs of fentanyl labs in Canada that the law enforcement folks were leaving alone. Canada’s got a big drug problem.”
They should attach a picture of Colin Powell holding up a vial. “I’ve seen photographs! In the situation room, no less!”
Kevin Hassett is flat out lying. They are using fentanyl as a “Weapons of Mass Destruction” excuse for tariffs because Section 232 of the law requires a national security emergency to allow Trump to independently enact tariffs without the permission of Congress. Nobody with a brain in their head believes that this is really about fentanyl, but there goes Hassett on nation TV telling a lie to the public around the world.
Unfortunately, economists are some of the worst people on the planet and use their profession to do enormous damage. It’s shameful. They need to police their own.