Trump 2.0 starts off poorly! The Atlanta Federal Reserve predicts a 1.5% contraction in U.S. GDP in the first quarter

The Federal Reserve Bank of Atlanta issued a warning signal about the U.S. economy on Friday, predicting that U.S. GDP will contract by 1.5% in the first quarter. In contrast, just last week, the Atlanta Fed had predicted a 2.3% growth in GDP for the first quarter. A month ago, the agency's forecast growth rate was even as high as 3.9%. Media reports indicate that this forecast marks a significant adjustment by the Atlanta Fed over the past few weeks, and it comes just over a month after President Trump took office. The Atlanta Fed's GDPNow indicator is not an official forecast but a real-time GDP estimate based on the latest economic data. The first quarter will end in late March, and the official GDP data will be calculated and released by the U.S. Department of Commerce. However, analysts believe that the sharp decline in this leading indicator will still attract widespread attention from policymakers, economists, and the market, especially against the backdrop of strong fourth-quarter GDP data released by the U.S. Department of Commerce this week. The annualized GDP growth rate from October to December last year was 2.3%, while the third quarter saw a GDP growth of 3.1% and the second quarter grew by 3.0%. In recent weeks, there have been some warning signals in the U.S. economy, particularly amid increasing uncertainty in macroeconomic policy and rising inflation. For example, the inflation indicator favored by the Federal Reserve—the Personal Consumption Expenditures (PCE) price index—showed on Friday that its annual growth rate reached 2.5%, although it slightly decreased by 0.1 percentage points from the rising trend observed in the fall. Meanwhile, Personal Expenditures fell by $30.7 billion, a decrease of 0.2%. What worries economists even more is that consumer expectations for inflation over the next year have reached their highest level since November 2023, with inflation expected to rise from 3.3% in December to 4.3% in January 2026. Businesses are also dissatisfied with the uncertainty surrounding the economic policies of the new Trump administration, especially given the repeated announcements and cancellations of new tariff policies, which could impact business investment. Analysts at Deutsche Bank wrote in a report to investors on Thursday, "Early signs of current policy uncertainty have begun to affect consumer and business confidence," "These early signs of weakened confidence may prompt the U.S. government to adopt a more cautious approach when cutting spending and implementing tariffs. Otherwise, the current policy sequence could lead the market to first price in higher recession risks."