The latest GDPNow update indicates a Q1 GDP growth projection of -2.8%, revised from -1.8%. The gold adjusted model estimates a smaller decline of -0.5%.
Recent data from the US Census Bureau and the US Bureau of Economic Analysis show a decline in net exports’ contribution to real GDP growth. The standard model’s projection dropped from -3.95 percentage points to -4.79 percentage points, while the alternative model’s estimate reduced from -1.92 percentage points to -2.53 percentage points.
Worsening Gdp Outlook For Q1
This article outlines a worsening outlook for US economic growth in the first quarter, as measured by GDP. The GDPNow model, which is frequently updated with incoming high-frequency data, currently estimates a decline of 2.8%. This is a lower figure than the model’s previous estimate of a 1.8% drop. Meanwhile, when adjusted for gold prices – intended as a proxy for systemic stress or inflation-adjusted monetary activity – the contraction is less steep, at just 0.5%. This suggests that while traditional indicators are painting a more negative picture, alternative measurements show a slightly more resilient picture underneath.
A noticeable drag is coming from trade. Official data reveal that net exports — essentially goods and services sold abroad minus what’s brought in — are having a heavier pull on real GDP than previously calculated. The weight of this component has deepened. In the standard model, the subtraction widened sharply, from nearly 4 percentage points to nearly 5. In the version that adjusts for commodity-linked measures, the drag worsened by about 0.6 percentage points, now landing just north of 2.5. This loss reflects changes likely linked to softer foreign demand, higher import levels, or both.
So what can we pull from this? First, tightening forecasts indicate a faster shift in sentiment – not just a slowing trend, but a sharper one that’s gathering pace with every data release. Smarter positioning starts by identifying whether the current downturn is driven more by consumption sluggishness, export pressures, or inventory unwinds; right now, the trade side bears more weight than consumer activity.
That’s worth thinking about. It might not make sense to treat all sectors as moving uniformly. With net exports dragging heavier than consumption or government spending, short-term contracts linked to external exposure (like manufacturing for exports) present more downside than services driven by domestic demand. Positions extended too far into optimism may not meet current conditions.
Evaluating Model Divergence For Strategy
It’s also essential to spot which model better matches current behaviour. We’ve found that the gold-adjusted track, while smoother, tends to better reflect longer-term pressures without the noise. This gap between the two outlooks — almost 2.3 percentage points — shouldn’t be ignored. Movements here may signal that monetary stress or shifts in inflation-adjusted risk perception are undervalued by headline models.
With projections dropping and differentials widening, we need to reassess how we define near-term stability. Leveraged bets that assumed a floor under quarterly growth need to be reconsidered. Risks that were deemed remote in late February — perhaps even dismissed outright — now come across more visibly in early March estimates. There’s less margin for single-point errors.
Short-term hedging should be tighter. Systems must reflect the speed of revisions, not just their direction. If a model can lose 1 percentage point in a single update, then any auto-response mechanism based on monthly trends could easily underreact.
Eyes will be on the next set of data: inventory revisions, services PMI, higher-frequency consumption measures. It’s not yet about whether contraction continues — that part is nearly priced in — but how persistent trade drag is and whether it spreads to other components through job cuts or tighter credit. Watch for tell-tale signs like corporate transport activity or early claims data moving ahead of average trends.
We continue to track how revisions behave after durable goods orders and PCE data. If these beat expectations, some reversals in model estimates could emerge. But until then, asset allocations sensitive to the shape of the yield curve or forward earnings multiples need to be reevaluated with more frequent intra-day checks rather than once a week.
Staying methodical will carry more weight than betting on a sudden pivot.
