US consumer behind slower growth in early Q1 | Natixis Investment Managers

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

Source: Bloomberg, February 28, 2025

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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