The recent downshift in estimates for US economic output in the first quarter persists, based on the revised median nowcast for a set of analytics compiled by CapitalSpectator.com. The sluggish median estimate for next month’s release of the official Q1 GDP report suggests that the economy will continue growing in the first three months of 2025, but the slide in the past few weeks highlights an increased vulnerability in Q2 and beyond.
Output is set to rise a weak 1.2% in the first quarter (annualized real rate), according to the median nowcast. If correct, growth will slow substantially from Q4’s 2.3% advance.
As recently as mid-February, the Q1 nowcast was printing in line with Q4’s moderate 2%-plus increase. But estimates fell earlier this month, as tariff risk began to weigh on nowcasting models. Today’s updated 1.2% nowcast for Q1 marks a slight decline from the 1.4% estimate published on Mar. 5.
Analysts are debating how much of a threat is posed by sharply higher tariffs and the potential for a global trade war as nations respond to the US policy change. What almost everyone agrees on is that uncertainty has risen sharply as the details and timing of President Trump’s tariff plans unfold and markets try to guesstimate if he’ll revise previous announcements.
The current median 1.2% nowcast for Q1 is roughly at the pace that is considered stall-speed growth, advises Mohamed El-Erian, president of Queens’ College, Cambridge, economic adviser at Allianz and the former CEO of PIMCO. In an interview with MarketPlace yesterday, he said:
“Coming into the year, the International Monetary Fund thought that we would grow at about 2.7% [for all of 2025]. I suspect if the IMF were to update its projection today, that number will be 2% or below. Why does that matter? Because stall speed for the U.S. economy is about 1%. Then the probability of a recession suddenly goes up significantly.”