The Way We Were… GDP Edition

Planning a summer vacation with winter economic data? Good luck.

KEY TAKEAWAYS

• GDP is a key measure of national economic health—but it’s a lagging indicator.
• Today’s release is the final Q4 2024 GDP revision—essentially old news.
• Major economic changes from the new administration (tariffs, taxes, deficit policy) are just beginning.
• Real GDP impacts will show up in future quarters, not today’s print.
• Today’s data serves as a pre-policy-change snapshot—useful for comparison.

MY HOT TAKES

• GDP is more about direction than destination—it’s the trend that matters.
• Backward-looking data is only helpful if you understand what’s coming next.
• Trade policy and consumer confidence are deeply linked, but not always immediately.
• Government spending remains murky, but will be key in shaping upcoming GDP.
• We’re standing at the edge of a new economic cycle—today marks “before.”
• You can quote me: “Take a picture of this morning's release, because the ones that follow are likely to be vastly different.”

The way we were. To some, those words carry a lot of emotion. The 1973 Barbra Streisand hit in and of itself is enough to get even the toughest Wall Streeters a bit emotional. 😉🥹 Some folks get emotional from images of those “misty-water colored memories,” and others because the song takes them back to a certain time in their lives. OR BOTH.

Today I am not going to evoke memories of love lost or smiles faded. No, today, I want to talk about the nation’s total economic output. You know, GDP, or Gross Domestic Product. We are all obsessed with the obscure number, because it is, believe it or not, the simplest way to measure how we are doing. What’s more, most countries in the world calculate it in a similar fashion (though we cannot tell exactly how accurate some may be). That makes it easy for countries to compare themselves to others. It is a sign of national health. Similar to our physical health, we like to see that getting better, not worse. So, GDP growth is good, and decline is bad. More growth is good, less growth… er, stinks. 

So how is the US doing? Is GDP growing? A lot or a little? Well, at 8:30 Wall Street Time, we will know exactly how well the US is… rather, WAS doing… LAST YEAR. That’s right, this morning’s GDP release is actually the THIRD estimate of Q4 GDP from 2024. I don’t know about you, but I already forgot what I wore on New Year’s Eve. Seriously, I just broke out my Spring bow ties. I am wanting to plan a family vacation for this summer. Summer? Yeah, that’s how people do it. That is not going to be easy because how can I make commitments to spend money in August, if I am unsure of how my financial situation will be at the time? I certainly can’t base it on how well I did in October, November, and December of last year, can I.

Well, if we can hang on for a few more weeks, we can find out how well the US economy did in this quarter. You know, the one that ends next Monday. Which also happens to be 2 days before a fresh wave of tariffs are set to hit with a bunch more new ones expected to be announced. Folks, we will officially be in Q2 next Tuesday, and if we can be patient, and wait it out for 4 weeks and a day, we can see how the Bureau of Economic Analysis thinks the US economy did THIS quarter. This quarter, which actually welcomed a new president with a very big economic agenda. Topping that agenda was trade and tariffs, reducing the deficit, and stimulative tax legislation. 

Those are all noble, but difficult, endeavors. I think that it is fair to say that he jumped right into the first, stepped into the second, and the third… well, we are told, “soon.” Today there are tariffs that have been in effect for a part of this quarter. So, will we see any notable changes in GDP as a result? Well, not likely as a direct result. Indirectly, there is the possibility that we will see minor frictions in consumption (stuff you and I buy) resulting from a decay in consumer confidence, which may indirectly stem from trade tensions. Corporations, which have a more direct impact on private investment, may have slowed expenditures awaiting policy clarity. The last major portion of GDP is government spending. On that, we know that there is a lot going on, but it not yet clear that the government spent less in the first quarter.

Truly, any larger policy-driven impacts, direct or indirect, are likely to occur in future quarters as fund flows shift and policy gets locked in. So, why am I bringing all this up on the morning that we are about to get a final reading from last quarter’s economic output? Because, going forward we will see all the impacts, direct and indirect, from the new administration. GDP is the total amount of domestic output of an economy. That number is not as important as its change over time. Is it going up or down, and by how much? Also important is the trend of those changes. In other words, is it accelerating or decelerating? Pro-tip: the former is preferred. Today really marks the starting line. So, take a picture of this morning's release because the ones that follow are likely to be vastly different. It is far too early to tell how our future selves will look back on the picture. Will it be one of “smiles left behind,” or will it be so “painful that we choose to forget” it.

YESTERDAY’S MARKETS

Stocks declined yesterday with shares gasping for air under threats of new tariffs on Autos and parts. Spoiler alert: those tariffs are happening. Indexes broke a winning streak closing in the red ahead of key economic figures today and tomorrow.

NEXT UP

• Initial Jobless Claims (March ) is expected to come in at 225k, slightly higher than last week’s claims
• Annualized Quarterly GDP (Q4) is expected to come in at 2.3% in line with earlier estimates.
• Fed Speakers: Barkin and Collins.

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