Nowcasting Trump's first quarter of GDP no recession is in the cards yet

The Trump administration's trade policies have had many analysts calling for a recession. However, according to CEIC's nowcast, the US economy slowed slightly, but isn't close to a contraction yet.

Our proprietary nowcast is driven by a machine-learning model that taps high-frequency and alternative indicators. It's calling for growth of 2.2% in Q1, down from 2.5% in the final quarter of 2024. For the current quarter, our nowcast estimates growth is running at a 2.4% pace.

Trump's decision to pause most of his "Liberation Day" tariffs led to a rebound in the stock market, and mitigated some of the recession calls, too. On April 9, Goldman Sachs said a recession was no longer the firm's base case. Nevertheless, its economists still put a 45% probability on contraction.

Official Q1 GDP figures will be reported on April 30.

Our second chart compares alternative forecasts for Q1 growth from various regional branches of the Federal Reserve. Notably, they are almost all somewhat more optimistic than our nowcast.

(The exception is the Atlanta Fed's GDPNow model, which is predicting a -2.4% contraction; as we have written before, this model's usefulness has been distorted by a heavy influx of gold imports to the US. Their gold-adjusted estimate also shows a smaller contraction: -0.3%.)

We've added more forward-looking indicators in our final charts.

Amid worries that tariffs will drive inflation higher and slow growth, consumer sentiment has been deteriorating sharply, according to the University of Michigan's latest survey. Shockingly, American consumers are also expecting year-ahead inflation to accelerate to 6.7%, which would be the highest level since 1981.

While Wall Street isn't calling for inflation to be that high, many economists believe such expectations can become self-fulfilling. Meanwhile, price increases could shrink the Federal Reserve's room to support growth with rate cuts.

According to CME's FedWatch Tool, which tracks futures prices. traders anticipate the next Fed cut will occur on June 18. This marks a recent change from the early April market turmoil, when concern about Trump's tariff plans made an early rate cut almost a 50-50 proposition on FedWatch. It's also a change from mid-February, when markets were pricing no cuts until later in the year.