US GDP Growth Rate Suddenly “Plummets”

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Federal Reserve ‘GDP Now’ Model… Trump Tariff Bomb + PCE Price + Zelensky Bomb

As the New York stock market is shaken by the Trump tariff bomb, PCE inflation, and the breakdown of the Trump-Zelensky White House meeting, the US GDP growth rate has suddenly turned into a “negative plunge.” With the Trump tariff bomb, PCE inflation, and Zelensky bomb intertwined and even reports of a GDP turn to the negative, not only the New York stock market but also the dollar exchange rate, government bond interest rates, gold prices, international oil prices, and virtual cryptocurrencies such as Bitcoin, Ethereum, and Ripple are shaking.

According to the New York Stock Exchange on the 2nd, the Atlanta Federal Reserve Bank’s “GDP Now” model, which estimates the US economic growth rate in real time, showed that the US economy turned into negative growth in the first quarter of this year. GDP Now presented this quarter’s growth rate as -1.5% on an annualized basis compared to the previous quarter. This is a figure that is 3.8 percentage points lower than the 2.3% on the 19th. The Atlanta Fed explained that the latest economic indicators, including the US January personal consumption expenditures (PCE) released earlier that day, showed that the real personal consumption expenditures (PCE) growth rate in the first quarter fell from 2.3% to 1.3%. The contribution of net exports to the growth rate fell sharply from -0.41% points to -3.70% points.

The last time the US economy contracted was in the first quarter of 2022 (-1.0%). The ‘Blue Chip Consensus’, which collects forecasts from private experts, shows that the first-quarter growth rate is generally distributed between the late 1% range and the mid-2% range. Since there is still a month left until the end of the first quarter, GDP Now’s estimate is subject to change in the future.

The US Department of Commerce announced that the US gross domestic product (GDP) growth rate (preliminary figure) in the fourth quarter of last year was tallied at 2.3% (annualized rate compared to the previous quarter). Unlike Korea, the US converts the growth rate (seasonally adjusted) compared to the previous quarter into an annual growth rate to announce GDP statistics. The annual growth rate for 2024 was tallied at 2.8%, the same as when the preliminary figure was announced. The preliminary figure is calculated by reflecting economic activity indicators that were omitted when the preliminary figure was estimated. The growth rate of private expenditure (final sales to domestic private buyers), which shows the basic trend of demand in the US economy, was revised downward from the preliminary estimate of 3.2% to 3.0%. The personal consumption expenditure (PCE) price index growth rate was revised upward by 0.1%p from the preliminary estimate (2.3%) to 2.4% in the fourth quarter of last year. The core PCE price index growth rate, excluding food and oil, was revised upward by 0.2%p from the preliminary estimate of 2.5% to 2.7%.

The upward trend in the core PCE price index growth rate is a factor that may cause the US Federal Reserve (Fed) to be more cautious in its approach to interest rate cuts in the future. The Fed uses the PCE price index growth rate as a criterion for judging the achievement of the inflation target when deciding on monetary policy. Former President Donald Trump will hold the first White House Crypto Summit on March 7 (local time). This meeting will be attended by CEOs of major cryptocurrency companies, investors, and policymakers, and the key agenda items are expected to be the Bitcoin (BTC) strategic reserve, stablecoin regulations, and ways to foster the U.S. cryptocurrency industry. With Trump pursuing a pro-cryptocurrency policy, this summit is expected to be an important event that will determine the direction of U.S. cryptocurrency regulations for the next four years. Industry experts say, “Now that the Trump administration has control of Congress, this is the perfect opportunity to pursue pro-cryptocurrency policies,” and are paying attention to the possibility that the Bitcoin and altcoin markets will react strongly to regulatory changes following the summit.

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