Trade Data Smacks GDPNow First Quarter Forecast Down to 1.1 Percent

Key Takeaways

• GDPNow nowcast cut to 1.1% annualized
• Net‑exports contribution dropped by 0.53 percentage points
• February trade deficit widened to $57.3 B
• Model likely overestimates GDP if March trade remains weak
• Inflation reports may push Q1 GDP negative

Pulse Analysis

GDPNow, the Federal Reserve Bank of Atlanta’s real‑time forecasting tool, updates its nowcast as fresh data roll in, offering a snapshot of what the Bureau of Economic Analysis might report. The latest revision to a 1.1% annualized pace reflects the model’s sensitivity to net‑exports, a component that swung sharply negative after February’s trade figures showed a $57.3 billion deficit. By design, GDPNow incorporates a blend of leading indicators, but sudden shifts in trade flows can outpace its assumptions, creating a gap between the nowcast and eventual BEA release.

The trade data shock traces back to a Supreme Court decision that halted certain import activities while the International Trade Court ordered refunds. Importers, anticipating a tariff reversal, delayed shipments, resulting in a pronounced dip in January imports and a modest rebound in February that still left net‑exports weaker than expected. Given typical 20‑ to 36‑day ocean transit times, the bulk of the catch‑up is projected to appear in March’s figures, which could further erode the nowcast if the rebound falls short. Analysts therefore view the current GDPNow estimate as potentially overstated, especially if March’s advance trade report confirms continued deficits.

Compounding the trade weakness, inflation metrics are poised to stay elevated. The upcoming March CPI and PCE releases are expected to show hot price growth, tightening the Federal Reserve’s policy stance and potentially dampening consumer spending. When combined with a deteriorating trade balance, these inflation pressures could tip the first‑quarter GDP into negative growth, a scenario that would reshape expectations for the Fed’s rate trajectory and influence equity and bond markets alike.