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CHART OF THE WEEK

US consumer behind slower growth in early Q1 

In terms of economic data released in late February, a large standout was the Atlanta Fed’s GDPNow (US GDP growth estimate for Q1 2025) falling into negative territory. This slowing was largely driven by a significant drop in both net-exports and consumption. It appears companies began to import more to front-run tariffs the Trump administration is expected to impose on China, Mexico, Canada, and more. Plus, the US consumer is saving more.

Contributions to GDP growth

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  • Personal spending dropped -0.2% vs. an expected +0.2%. This was largely due to the US savings rate jumping from 3.5% to 4.6%. 
  • Consumption is the culprit: Those blue bars in the chart have grown larger over the past few quarters, as consumption became the engine of US growth. That engine is beginning to sputter. 
  • The drop in final sales to private domestic purchasers – a long name for one of the most reliable indicators of underlying economic momentum – is now tracking 1.8% for Q1, down from 3.2% in Q4.
  • It’s still early, but GDPNow predicts the US economy will contract 2.8% in Q1. 

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This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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