There were weeks of breathless commentary about 5% GDP growth in the US in the fourth quarter and now here we are — less than 24 hours from the release — and the tracker has been revised all the way down to 3.0%.
The quarter started off with a super-strong trade balance reading for October but it was all smoke and mirrors around pharma exports due to tariffs and that was followed by a normalization of trade flows in Nov/Dec. Now GDP is looking like it will be at 3.0%, which also happens to be the economists’ consensus. In light of today’s trade balance number and revisions lower in inventories, I see downside risks.
In any case, the quarterly numbers so far in 2025 have been
- Q1 2025: -0.6%
- Q2 2025: +3.8%
- Q3 2025: +4.4%
A reading of 3.0% would put annual growth real growth at 2.6% on a Q4/Q4 basis. That’s a nice year for the world’s biggest economy but it’s happening with a deficit at 6% of GDP. You could probably strip 4-5 points off GDP if the US was forced to run a balanced budget.
This article was written by Adam Button at investinglive.com.