Summary
We reduce our 2025 estimate for GDP growth to 1.3% against 2.0%. Higher prices, lower expenses from the federal government and extreme market volatility can all weigh on consumer spending and commercial investments. We are now expecting the GDP to increase by 1.4% by 1T25, 1.0% in 2q, 1.4% in 3q and 1.4% in 4q. Our growth estimate of 2026 is 1.9%, compared to 2.1%. We expect non -defensive federal expenses to decrease at 1T26 before settling in growth of around 1%. This can pinch state and local spending and tighten employment in government universities and entrepreneurs. Unemployment is low at 4.2%. We expect consumption expenses to increase, but to 1.4% compared to our previous estimate by 2.3%. Potentially higher inflation can reduce spending on sustainable and discretionary products. Service spending, such as rent and health care, are historically stable. But the volatility of the stock market can reduce travel, leisure and restaurants. The indicators driven by a wide range of timely data indicate 1Q growth, but the message is less categorical and many of our concerns are not yet reflected in the figures. The GDP of the Federal Bank of the Reserve Bank of Atlanta, Nowcast, estimated a drop in GDP 1q by 0.3% (adjusted for imports of gold) on April 9. The economic index of the New York Federal Reserve Reserve for 1 Q called to 2.6% on April 4.
