US President Donald Trump speaks to media members on board Air Force One before landing in West Palm Beach in Florida, USA, March 28, 2025.
Kevin Lamarque Reuters
Politics uncertainty and new sweeping of Trump's administration are combined to create a stagflation perspective of the US economy in the latest CNBC Rapid update.
Quick update, averaging forecasts from 14 economists to GDP and inflation, sees an increase in the first quarter recording an anmic 0.3% compared to 2.3% reported in the fourth quarter of 2024. It would be the weakest growth from 2022, when the economy emerged from Pandemia.
Meanwhile, the basic PCE inflation, the preferred FED inflation rate, will remain at the level of about 2.9% for most of the year before the decrease in the fourth quarter resumes.
Behind GDP forecasts there is new evidence that a decrease in consumer and business moods appears in real economic activity. The Trade Department on Friday announced that consumer expenditure corrected about inflation in February increased only 0.1%, after a decrease by -0.6% in January. The economics of the campaign reduced the prospects for an increase in expenses to just 0.2%, including quarter with 4% in the fourth quarter.
“Signs of slowing data on severe activity are becoming more and more convincing after prior deterioration of sentiment,” Barclays wrote at the weekend.
Another factor: import of import (which subtracts from GDP), which seems to pour into the USA in front of the tariffs.
The good news is that the import effect should decrease, and only two of 12 surveyed economists see a negative increase in Q1. No forecasting of subsequent quarters of economic contraction. Oxford Economics, which has the lowest Q1 respect at -1.6%, expects to constantly leave the import, but sees the reflection of GDP in the second quarter to 1.9%, because this import will ultimately increase growth when they are counted in inventory or sales.
Risk of recession growing
On average, most economists forecast a gradual reflection, with GDP in the second quarter is 1.4%, the third quarter of 1.6%, and the last quarter of the year increases to 2%.
The danger is an economic with an anemic height of only 0.3%, it can easily slip into negative territory. And with new tariffs they will come this week, not everyone is so sure of reflections.
“While our base line does not show a decrease in a real GDP, taking into account the growing global trade war and a reduction in the Doge in the field of jobs and financing, there is a good chance that GDP will fall in the first or even the second quarter of this year,” said Mark Zandi from Moodi's Analytics. “And the recession will be likely if the president does not start withdrawing the tariffs to the third quarter.”
Moody is looking for an anemic Q1 growth by 0.4%, which gained up to 1.6% by the end of the year, which is still modest below the trend.
Persistent inflation complicates the Fed's ability to respond to growth flag. Core PCE is expected to 2.8% in this quarter, growing to 3% in the next quarter and remaining at more or less at this level, until it drops to 2.6% per year.
While the market looks like banking on foot reductions, the Fed may have difficulty with justification until inflation begins to fall more convincingly at the end of the year.