This week, a group of economists forecast a sluggish first half for the U.S. economy this year. They project first-quarter GDP growth to be the softest since 2022. The Rapid Update, which calculates a three-month moving average of the forecasts from 14 different economists, is forecasting a weak 0.3% growth for the first quarter. Oxford Economics has provided the most pessimistic estimate so far, at -1.6%, citing continued import drag as the main reason. The potential impact of new tariffs that will go into effect this week, on top of existing tariffs, can only exacerbate already difficult economic conditions.
Through August, the Commerce Department has indicated a slight rise in real, inflation-adjusted consumer spending. It increased by only 0.1% in February after falling 0.6% in January. Action Economics has gone from forecasting, until recently, a 2.4% annualized growth in nominal spending to… It now expects growth of only 0.2%, slashed from previous forecast of 4%. Oxford Economics, for one, has a second-quarter GDP bounce back all the way to 1.9%.
In a survey of 12 top economists, two forecast negative growth for the first quarter. None are anticipating a double-dip, with economic contraction over two or more straight quarters. Fears of a looming recession continue to mount. If the current administration doesn’t reverse course on its tariff policies by Q3, matters will only get worse.
“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” – Barclays
Stubborn inflation also other complicate things Federal Reserve’s battle against weak growth. We’ve long warned that the central bank would find it hard to respond appropriately should inflation pressures emerge amid an economic introversion.
Even as pressure builds for new tariffs, so too does concern over their impact on the economy. And economists have been cautioning that these tariffs will deepen those wounds, thus making it all the more difficult for the economy to get back on track.
“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year.”
As the anticipation for new tariffs grows, concerns over their potential effects on the economy are also mounting. Economists warn that these tariffs could exacerbate existing issues, making it more challenging for the economy to regain momentum.