Trade data from this morning has driven a huge drop in the Atlanta Fed GDPNow real-time tracker for Q1 GDP. Today's data took it from 2.321% to -1.477%. What's going on? Let's do a little thread explaining.
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GDP in this quarter projected significantly down because of a rise in imports, perhaps front-loading of imports by companies trying to get ahead of tarrifs. Timing issues relating to these showing up in consumption or inventory makes the decline in GDP look more than it actually will be.
Exactly - consumers are nervous, Trump’s erratic changes make people uneasy about the future. When consumers are nervous about the future, they stop spending where they can.
I don’t need a model to predict a recession, if inflation continues, we’ve got stagflation.
The Q1 GDP real-time tracker dropped because the consumption expenses not only were lower than expected but dropped. Consumption accounts for a large part of GDP.
I’m geeking out and loving the thread. Been talking my wife’s ear about this inevitable contraction for over a month! This administration is not very imaginative. Their math simply doesn’t math doing what they’re without a brutal reality check. It’s coming… #wakeupwallstreet
What's the point when nobody can afford to rent? Only oligarchs will benefit. NEWSBREAK for people who always think THEY won't be among those hurt. Wealth is all relative. You thought you wanted to save a bit on taxes but will find your assets worth ZILCH instead!
If you haven't read Project 2025, do so. It explains ALL the above. It's the goal. Project 2025 on 90 days will destroy the country. If you can't stomach reading it ChatGPT it. And don't forget to ask it what happens to the US when Project 2025 is enacted in 90 days.
Plus MAGATs will use crashing economy to justify slashing social services (eg food stamps, Medicare, SSA, etc), even despite fact Gov’t benefits (eg food stamps) prop up food producers.
Bottom line: we’re headed for Soylent-Green-level income inequality, with ultra-rich in hi-rises & plebes below.
Not to mention, they're trying to get everyone on board with crypto, so crashing the monetary is one way to reinvent the system in their twisted minds.
Money is power. Many a strong man has backed down from wealthy impacts. Jackson was stopped in this way so maybe the wealthy will start to be impacted in ways that force the toddlers to change. Maybe we can finally get a grown-up in that room to take away the toys.
Good analysis. My sense is that tariffs will dampen imports (no surprise there) and animosity towards the US will seriously impact exports, particularly consumer goods. Tourism into US is also going to be in the toilet.
tourism in the toilet no kidding, they are messing with the national parks and their staffing, a major tourism attraction, half the world is boycotting the u.s., and planes in the u.s. are of questionable safety at this point.
I was in South Florida two weeks ago. Hotels were empty. Hotel manager said Canadian “snow bird” bookings, which were a winter staple, were non-existent.
Our economy and nation are trapped in a shopping cart that is racing down a steep hill into traffic.
Yeah tariffs definitely reduce imports but in this case, we’re seeing front loading. Companies increased imports to stock up before they came into effect. It’ll likely drop sharply after tariffs, and then reach a new lower equilibrium once the over stock winds down in 3-6 months.
I’m British living in USA. I usually have multiple friends
/family wanting come over & visit us. This year instead they are trying to convince to move back home because of the descent into fascism. No one wants to come here.
We see the same in Europe. American made goods and goods from American owned companies are removed from the shelfes in supermarkets. Good luck America.
The largest purchaser of Spirits in the world is the Ontario government. They will not sell US spirits and wines. BC will sell California and Washington State wine but no Kentucky spirits.
I work in insurance and have had two Canadians cancel policies because they sold their property here. Not sure if this is a coincidence or part if the Canadian boycott of America.
Pay attention to the fact this is citizen driven, not a government or corporate mandate. Restaurants aren’t carrying it because we won’t drink it. And I’m typing this in a pub listening to the people next to me talking about having just cancelled their trip to Las Vegas.
I’ve already cancelled about $600 worth of digital services I was personally paying annually and moved all company digital purchases to European companies (we’re too integrated to have depth in our own offerings). Probably $1500 that won’t be going to US companies now. FAFO.
I am an American but I don't blame you. How much do people have to take before they react? Right now Trump is the FA stage of FAFO. FO is coming due to decreased trade, investments, and outright boycotts. I cannot imagine the US automakers that have integrated operations across North America.
Thank you for being strong. I hope Canada, Mexico, rest of Europe boycott us. We Americans will feel pain but it has to be done to rid the world of dictators.
This friend south of your border fully supports you. How will Americans vacationing in Canada be viewed? Two locations from our short list are in Canada
Thank you for the response. I don't have, and will NEVER have a MAGA hat. And I have loved your country on prior visits, and hope to see you again soon
As an American l am 100% behind Canada. What's happening here is despicable. Like John Lennon once said, No one can harm you. Feel your own pain." Many Americans are going to feel pain, hopefully it wakes them up and out of the stupor they're in.
Thank you Paul and your fellow Canadians. You all can be much more effective than US citizens at providing consequences to Trump Administration for bad policies. Please keep it up for months or years.
I’m gonna focus on food, water, shelter, loved ones & my hobbies that don’t require spending on corporations for the foreseeable future. Cut back to the basics and save as much as I can.
Huge respect to you & all Canadians for this. I hope you know the majority of us here in the states see you as friends but feel helpless to stop the madness going on rn 😔
Canadian Owned and Operated….not only promoting our own Canadian owned stores-with banners and flag……but every item in grocery stores now have Canadian labels beside price tag. FAFO Felon/Dump-Tator😤.
Agree, also my sense is that importers have been and are buying up big before tariffs. Buy up now and store for higher prices later. expectations of higher price give no incentive to sell this stock as more profit can be gained later. Great for business bad for consumers.
Lumber good example. Canada provides 30% of US supplies. Tariffs add approx 40% to price. Problem is, US can’t replace Canadian supply, thus price of all lumber rises to new tariff price. Importers with supplies of pre-tariff stock make out like bandits (simplistic, but hope you get the idea)
we deserve to be the laughing stock of the world. I've already divested from tech-based index funds; cashing out of the rest on Monday and putting it all under the mattress. Won't ruin anyone's day but will make me feel better.
I moved from 65% stocks to 18% stocks on 2/17/25 and, so far, that was a good call. Plus I have four months living expenses sitting in a small credit union. Hope/strive for the best, plan for the worst.
I disagree strongly that we can assume that it’ll all balance out.
The surge in imports can be much more damaging than you’re anticipating. There are many segments of the economy that rely on government subsidies to affordable process raw goods that then benefit other markets in our economy.
Trump frequently says a million things and then doesn't act on them...but sometimes he does. So will we have tariffs on Monday or won't we. As far as business is concerned the answer is to mitigate and wait.
When people have chemotherapy the essential question is if it kills the patient or the cancer first. MAGA is a cancer on our country and killing it will not leave us unscathed.
There are no perfect analogies.
MAGA is forcing us to test it in real life. Hope we make it, but with the spectre of Martial Law, which he CAN do, I have little optimism. Their strategy seems to make us as sick as they can, in hopes of killing off only the 48.5% that refused to vote for a criminal.
And that's what I am confused about. They as te saving America from what? A great economy, inflation in it's place, mass employment? It's like they convinced people with everything that they somehow had it terrible. Guy complaining about 50cent eggs buying a $70,000 pickup evey 5 years.
I cannot overstate this enough, but: "save the country" means erasing black, brown and gay people from visibility and replacing them with white christian conservatives in commercials, movies, television. It's in all their screeds from John Birch to Heritage to MAGA YouTube dickheads
Gotta remember they’ve been brainwashed into thinking there’s an invasion at the border, trans are taking over women’s sports and men are going into women’s bathrooms dressed as women. They think crime is soaring, migrants are eating cats and dogs , they thought we were heading for WW3 under Biden…
Trickle-Down Economics clearly isn't working, so l think it's time we try Piñata Economics where we beat the rich with sticks until the wealth is redistributed.
The fact of the matter is prices on things that a tariffed will rise, consumption of everything will fall because of rising prices, production will fall, jobs will be lost and the economy will falter.
Canadian here. It's a lot more than that. We take this seriously and every single store is setting a drop in American product purchases. There is a buy Canadian app for scanning barcodes, and an online grocery guide https://madeinca.ca.
I am sure Canadians are buying a lot fewer American products but you really need to hear me when I say good exports in general, let alone to Canada, are a rounding error for American output. It’s just not big enough to make a big impact on overall GDP. Still hurts specific companies though!
I know i bought a new laptop and phone ahead of expected tarrifs on China. The laptop was reaching the end of its lifespan and I didn't think it would make it another couple of years. The phone was vital as mine was threatening to become a brick. I replaced both earlier then planned.
Friend I’ve seen that, in O&G service industry, since October. They started renting warehouse space, tripling orders for all sort of exotic alloys, canceling end of the year bonuses- redirecting to cash reserves and if u got priblem with it pink slip…And i can bet it was like that everywhere.
I’ve just got a small home bakery, but bought a lot of cocoa and packaging in December and January to get ahead of tariffs. It only makes sense that the people I buy from did the same.
But imports that are brought in to the US are also counted in other GDP measures. They either sit there, which means inventories rise. Inventories are a subset of investment. Or maybe they get used as part of corporate capex (also a part of investment). Finally they can be sold to consumers (C).
So when imports surge, they are mathematically offset by other measures of GDP rising, offsetting the impact for the most part. Measurement errors and timing issues can distort that though, especially with large spikes like this one! I think the latter is driving the GDPNow reading.
Over time, other monthly releases including inventories for manufacturers, wholesalers, and retailers should pick up the inventory increase implied by the huge import spike. But we don't have that data yet...it'll show up over coming months . Imports may also reverse (probably will).
Since the import surge came early in the quarter, the GDPNow model is extrapolating it forward. If it doesn't play out that way, import hit to GDP will fall. It will also likely be offset by inventory increases not yet showing up in January data as revisions + Feb/Mar inventory readings rise.
In other words, projections for the economy only look great because there was a lot of shipping of goods into the country (in anticipation of future high tariffs), but when the sales don't justify the glut of inventory and inventory just sits there, the economy looks bad.
We are going to see a long term drop in US exports due to new anti-American sentiment in Canada, the EU and elsewhere.
Not just Canadian consumers but industrial buyers are requesting alternatives to Made in USA products. Likewise tourism from abroad is going to fall.
All of this is to say the trade numbers will likely reduce growth relative to the trend in the economy for Q1. But they will 1) likely be a much smaller hit than GDPNow currently estimates because of how GDPNow works and timing of other data and 2) reverse in coming quarters given they won't repeat.
M is likely to level back down to Earth, particularly post tariff, but there's data to support that C and G are likely to dive while that's happening, if/when that occurs then I won't be far behind.
yeah we can have a debate about what C and G are going to do, and C estimate was revised down based on January consumption data, but that's all a speculative forecast on much weaker ground than the headline tracking number GDPNow has spat out.
What do you think this means for the markets? Ive been strongly considering pulling all my money and placing it in money market funds. (Esp if we shut down in a couple of weeks). Thanks!
Thats what i was thinking - sell now buy when it all tanks and it will.
I have a gut feeling the world will end up sanctioning us if dump is going all in to support russia - that will destroy our economy like the Great Depression
1) You need to look at the gains in your portfolio too, though. If you have significant capital gains, you will owe taxes on them, which will reduce your returns. It becomes a question of when you need access to the money in the investments.
2) It could well make sense to keep some invested as is, look at things like munis for income and put what you need access to soon in money markets. Good to talk to a professional on this.
We're another example of stocking up before the tariffs -- we bought the steel we need for a construction project for our grocery store in January. In our segment of the market, most stores have very full inventories. To the point where we are delaying future orders until we have space available.
Trump is doing exactly what Putin hired him to do. If Trump weakens the United States, Putin can roll right in and take it, just like he tried to take Ukrainian land.
Fuck Russia! US soldiers will turn their guns on the officers before standing with Putin. Only idiots from pyongyang sent to the meat grinder by their groveling leaders so willingly jump on front of Ukrainian drones and bullets.
What will hit six months from now? US exports as the world finds alternatives to US products? US may not be an export dependent economy but US companies are global companies and they're going to find themselves rejected in association. What's happening to Tesla in Europe could happen to them.
The import spike was led by a 33% rise in industrial supplies. This is the second month this category increased sharply. We don’t have a product breakdown for January yet, but an $8bn increase in gold in December accounted for much of the rise, and this could have again been a factor in January.
Understood - that's what I was thinking of. If I owned a factory relying on foreign bulk goods, and I expected them to shoot up in price soon, I'd order more than I usually need to 'lock in' current prices.
And maybe that's 100% wrong, and that's why I don't own a factory.
And this doesn't begin to take employment into the equation. Consumption drops when people lose their jobs of course but the tens of thousands of layoffs in both government and its contractors over the past month and forseeable future will depress consumption and our economy. Stagflation?
We have a man with a toddlers understanding of economics in the WH. This will get much worse, he is destroying our economy quicker than I predicted. I had given 6 mos I now think it’s 3 mos.
I hope I’m wrong but I’ve been in finance 30 yrs and look at economics reports everyday. It’s crashing much quicker than any of us thought. Hope you’re right 😬
and ofcourse he will start forcing the FED to make terrible interest moves for the longterm. Blame economic problem on Mexico and Canada, first with even higher tariffs, then when they tariff him back and shit crashes harder, he will invade to make em payback for damages. Book it.
Your statement assumes that he is trying to do the right thing and is incapable of it. I say BS, he is actively trying to destroy the economy which is what he's been stating in interviews for decades.
Yep you'll need pictures. Did you notice leaders take visual props with them when they meet the orange wankmaggott. Starmer took a letter from the king and Zelensky took pictures of returning POW's. They have to feed his tiny brain with images.
I purchased some stuff to get ahead of tariffs. I’m now full up on leggings and underpinnings. But with all this economic uncertainty, I’m drastically curtailing my spending. I’m not the only one either.
I purchased extra items I knew I would need. I'm a quilter and the only place to find the fusible I want is Canada. I purchased before the election and directly after it. I bought extra hoka's I don't need to buy
People building inventory given expectation of duties. Will level off or bounce the opposite direction if tariffs aren’t deployed, but could stay negative if more is spent to import, due to… tariffs
The imports.surged in January as a result of people afraid of the coming tariffs and increasing inventory? Ir is it normal for imports to surged in January?
Ok, so from that, I draw the conclusion that with inventories being beefed up in Jan, and sales slowing down due to slowing economy, then imports are likely to fall off for the next several months. Is that a reasonable assumption?
"remember when toilet paper went away? It's like that except the way the model works everyone used the TP at once. Once the model can see we're not all pooping immediately, it will catch up"
Without the luxury of a bunch of data, I'm on record 18 days ago that we're on the cusp of a demand driven recession that may not be easily recovered, including huge bout of stagflation. Not that I wanted to be right. Bigger worry? Access to unbiased data going forward. https://bsky.app/profile/notthedavidspade.bsky.social/post/3lhsttfeljc2o
I support Norway's choice. We are part of the axis powers and it is time to cut us off. It won't be pleasant for us, but we have to fight the Trump/Musk regime from within and without.
And the chain reaction starts. An employee laid off there will make financial decisions like canceling a vacation, choosing not to do home renovations, or keeping an old car. Those decisions affect other companies, their employees, and their vendors. Chain reaction.
This plus tariffs plus boycotts from within and outside the US (Canadians and Mexican are not playing!) and students with career plans now in shambles. We are in for a dark economy. Oligarchs don’t spend their extra tax savings. They just hoard $$$.
Cutting Government spending will have the biggest impact as sacked workers will not be spending their pay in American businesses and paying bills and mortgages.
Thank you for this, very informative. Is there a chance we see new trade data slightly revise Jan imports & bump up inventories & investment which will cause a positive nowcast revision, but a potential lag in Feb. PCE which would actually spell some underlying bad news with the positive revision?
I think we should treat mechanical stuff (revisions to trade data and whatever happens with new inventory/trade) separate from forecasting consumer behavior. They’re independent variables.
Totally! Apologies, I worded that poorly & didn't mean to imply causation. I'm more curious about timing. If I'm reading & understanding the release date cal correctly, more trade data on 3/6 and inventories on 3/17 which based on what you laid out are likely to have positive nowcast revisions.
If ends up being the case what should we be looking at afterwards for first potential macroeconomic headwinds? Obviously all of these components are important but my thinking was this massive drop and probable rebound might slightly obscure a potentially otherwise more worrisome Feb. PCE on 3/28.
I think the way I would frame it is that we will get a series of trade and inventory releases over the course of March and April that should lead to upward revisions in the nowcast. The consumption numbers are a completely separate question and there is risk both ways in my opinion.
The reasons for this is that the GDP now data extrapolates forward what happens in the first month of the quarter. And we just had a pretty significant miss for the January consumption data. So if there’s at all any bounce back in February, there is actually upside risk to the consumption forecast.
Fitting. Seeing as that’s how his family made their money. Slum lords. Maybe he’ll try to turn the entire place into a slum. He can be the slum lord of America!
I heard that thing sucked too (sorry, but you teed it up perfectly!). My dad DESPISED Hoover (the pres, not the vacuum). He was born in 1920. Living on the streets at the age of 9 with his dad, after the depression hit. They stayed in a Hooverville for a bit.
The one my dad stayed in was nothing less than horrifying. No food or water. Filled with criminals. He and his dad didn’t stay long for fear of their lives. America at that time was a free for all. And not one bank or steel baron cared if you lived or died.
The masses of government employees being laid off will have an (Investment) impact, as a significant proportion likely are cashing out their retirement, rather than letting it stay put.
Is there a multiplier that shows for how many ancillary jobs are created from federal spending? Like “for every federal job, two more jobs are created” etc?
Including the military there are roughly 4.5 million federal workers. So although very bad, please don’t overstate numbers it doesn’t do anyone of us any good
Neither will their extended families and many of their friends. Others will spend travel money in Canada, Mexico, or Europe. The Red states are on their own!
Some foreign billionaire with a gold card is going to buy up those houses and farmlands American farmers are losing and grow alfalfa for Saudi race horses or build private golf courses.
A waaaaay bigger threat than the amount of consideration it receives. Disenfranchise people from the land then create tech-bro fiefdoms. Positively dystopian.
If Walmart, the nations’s largest private employer, announced that it was going to lay off 10% of workers, it would run in the press as the beginning of an economic disaster. The US government is *the largest* employer in the country. So, why wouldn’t laying off 10% of the workforce do the same?
Even before they lay off Federal employees there's going to be suppression to spending because they've been told they are going to be fired. Of course it won't be 100%, but they told 100% of them they are not wanted and could be fired at any time.
In short, while major structural changes tied to Project 2025 would likely have more long-term impacts, specific policy shifts within the next 90 days could lead to noticeable economic adjustments in the short term. However, the full extent of these impacts might take longer to fully play out.
No that is not what they are saying. TL:dr the numbers look worse than they probably are because before the Trump administration importers brought in a lot of extra goods to stock up ahead of tariffs. This makes the model look worse because held inventory doesn't track as fast. But it is still bad.
Is there even room for much inventory though? I haven’t dealt with these things since before covid but I thought it was pretty much all just in time still. Holding inventory is expensive.
JIT programs are for the benefit of the company, the less inventory you carry the more operating capital you have. In this instance where they could see import costs increase as much as 50-100% bringing on extra storage for the short term is a financially viable act. But yes extra inventory=bad.
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I don’t need a model to predict a recession, if inflation continues, we’ve got stagflation.
https://bsky.app/profile/joshtpm.bsky.social/post/3ljawaw7ih22j
Bottom line: we’re headed for Soylent-Green-level income inequality, with ultra-rich in hi-rises & plebes below.
Hence the talk of forcing Fed Reserve to buy crypto as a reserve currency, replacing USD with crypto.
Why do you think Elon wants to visit Fort Knox to do an “audit”?
They’re literally going to rob Fort Knox in broad daylight, the ultimate crypto scam to date, because Elon wants more $.
I was in South Florida two weeks ago. Hotels were empty. Hotel manager said Canadian “snow bird” bookings, which were a winter staple, were non-existent.
Our economy and nation are trapped in a shopping cart that is racing down a steep hill into traffic.
Apart from that just cancelled Amazon Prime and do not buy US groceries when shopping.
And as someone mentioned already: this is a groundswell of people doing this on their own accord.
/family wanting come over & visit us. This year instead they are trying to convince to move back home because of the descent into fascism. No one wants to come here.
Might as well support a real democracy. ✊🇨🇦
If I could figure out a way to pay taxes to Canada instead of the US I would do it in a heartbeat.
We're shutting down to essential purchases only for the same reasons.
Scrambled tofu...yum!
The surge in imports can be much more damaging than you’re anticipating. There are many segments of the economy that rely on government subsidies to affordable process raw goods that then benefit other markets in our economy.
Additionally, you’re assuming that our exports will eventually balance it out. Have you been watching the news, dude?
Our biggest trade partners don’t want to rely on us anymore. Our exports will undeniably be taking a hit.
No, this will not level out.
Trump frequently says a million things and then doesn't act on them...but sometimes he does. So will we have tariffs on Monday or won't we. As far as business is concerned the answer is to mitigate and wait.
This alone can tank an economy
When people have chemotherapy the essential question is if it kills the patient or the cancer first. MAGA is a cancer on our country and killing it will not leave us unscathed.
MAGA is forcing us to test it in real life. Hope we make it, but with the spectre of Martial Law, which he CAN do, I have little optimism. Their strategy seems to make us as sick as they can, in hopes of killing off only the 48.5% that refused to vote for a criminal.
One guy told me yesterday that Trump just wanted to bring peace to Ukraine.
In summary, you are smart to have not checked in with your neighbor.
In truth, I am sympathetic. There is just so much noise and nonsense, so many law suits and lies It feels impossible to keep up.
Well, he fixed it but good.
Very deep thoughts to think about. While so insanely high that you wear sunglasses indoors.
*fixed it
Trump take car
Trump take jerb
Canadians have been pushing "Buy Canadian Only"
Largest Canadian media provides guides
The free world needs to cut America off and put on all the pressure.
C + I + G + (X - M) = Y
where
C = consumption
I = investment
G = government
X = exports
M = imports
Y = GDP
Because imports surged in January, tracking for M explodes higher...mechanically lowering Y.
Not just Canadian consumers but industrial buyers are requesting alternatives to Made in USA products. Likewise tourism from abroad is going to fall.
If so, M will likely drop for Feb/March, deeply impacting the Q1 projections, no?
If it just goes to inventory, there is no value add I assume.
It also seems to add to inflation on some markets
I have a gut feeling the world will end up sanctioning us if dump is going all in to support russia - that will destroy our economy like the Great Depression
1/
You should be far more worried about Yarvinites Musk and Vance crashing civil society for their own techno-nefarious ends.
Maybe invade Canada?
Its fucking madness
They may have voted for him, but they didn't vote for this. Such actions would tear the military apart.
Which is probably the plan.
He fucks EVERYTHING UP!
I can share your fundraiser anytime 🫂♥️
Would that affect GDP?
And maybe that's 100% wrong, and that's why I don't own a factory.
🚩🚩🚩🚩
https://bsky.app/profile/notthedavidspade.bsky.social/post/3lhsttfeljc2o