Summary
We are reducing our 2025 estimate for GDP growth to 2.0% from 2.3%. There are some headwinds, but unemployment is low at 4.1%. We expect consumer spending to grow 2.3% for the year, bolstered by 2.4% growth in the Consumer Services category (which represents 47% of GDP). It includes hard-to-avoid expenses such as rent, utilities, healthcare, and insurance. For perspective, net exports of goods and services (the trade deficit) represent -3.1% of GDP. The federal government excluding defense represents just 2.7%. The ISM Services Index showed expansion for an eighth consecutive month in February and has indicated expansion in 54 of the last 57 months. We expect GDP to grow 1.6% in 1Q25, 1.8% in 2Q, 2.3% in 3Q, and 2.3% in 4Q. Our 2026 estimate is 2.1%. The reduction in our 1Q estimate from 3% to 1.6% represents adjustments to several items in our model. Shoppers may have paused in January to pay bills after robust holiday spending. Imports, which are a drag on GDP, appear to have been elevated by purchases ahead of anticipated tariffs. Three indicators driven by a broad array of timely data point to 1Q growth. The Federal Reserve Bank of New York’s Staff Nowcast for 1Q called for 2.67% growth on March 7. The Weekly Economic Index tracked by the Federal Reserve Bank of Dallas is based on 10 daily and weekly indicators of consumer behavior, the labor market, and production. If, for example, an index value
Source: finance.yahoo.com