'Negative GDP Growth Is More Likely Than Not' In Q1, Economist Warns

Wall Street received some positive data Thursday morning after the Bureau of Economic Analysis upwardly revised U.S. gross domestic product growth for the fourth quarter of 2024. But, experts are concerned about upcoming GDP estimates as the effects of new trade policies are felt.

The Data: The Bureau of Economic Analysis said the economy grew at an annualized rate of 2.4% in the fourth quarter of 2024, a slight increase from the earlier estimate of 2.3%.

The data also indicated a deceleration compared to the 3.1% growth observed in the third quarter.

The report revealed that the rise in real GDP during the fourth quarter was mainly driven by increased consumer and government spending, partially offset by a decline in investment. Imports also decreased, negatively impacting GDP calculations.

Experts React: Most experts agree that the U.S. economy remained strong through the end of 2024. However, there could be turbulence ahead as the effects of tariffs and trade policies begin to show in the data.

Jamie Cox, managing partner for Harris Financial Group, said fourth-quarter GDP was strong, but expressed concern about the first-quarter GDP report.

"Hard to see recession in these data, but the real test will be the initial read on Q1 2025 GDP, when the trade shocks feed into the numbers. That may not look so rosy," Cox warned.

Joseph Brusuelas, chief economist at RSM, said that although the economy ended 2024 in good shape, there could be major changes ahead in the first-quarter data related to tariffs and policy changes.

At the end of 2024 US gross domestic income grew at 4.5% pace. The average of GDP/GDI was 3.5%. Disposable personal income was growing at 1.9% and a spate of alternative growth metrics point to 3% or better growth.

The takeaway: The economy finished 2024 in strong shape. Don't… pic.twitter.com/rOxD7RBsXn
— Joseph Brusuelas (@joebrusuelas) March 27, 2025

Chief economist for Comerica Bank Bill Adams gave an even more gloomy forecast saying, "The first quarter GDP report will be ugly, in large part due to a drag from trade."

Alan Blinder, former Federal Reserve vice chair, expressed similar sentiments during an interview with CNBC on Wednesday. He predicted Trump's tariffs will lead to lower growth and hurt the U.S. economy.

"I'm worried about it staying above zero … Negative GDP growth is more likely than not," Blinder said.

Markets React: The three major indexes are mixed in Thursday's midday trading. Stocks are attempting to rebound from earlier losses as Wall Street digests Trump's latest tariff announcements and the morning's economic data releases.

The SPDR S&P 500 ETF Trust SPY, tracking the S&P 500, was down 0.13% at $567.86, the SPDR Dow Jones Industrial Average ETF DIA was down 0.31% at $422.91 and the Invesco QQQ Trust QQQ, tracking the Nasdaq 100 index, was down 0.27% at $483.05 at the time of publication Thursday.

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