Will Q2 Be Officially A Recession? Atlanta Fed Economist Forecasts | Patrick Higgins

Summary

Patrick Higgins, creator of the Atlanta Fed GDPNow model, explains why the model projects 2.4% Q2 2025 GDP growth after a negative Q1. He attributes the rebound mainly to a smaller net-export drag and solid consumer spending, while noting inventories and trade flows remain volatile. Higgins also discusses how hard and soft data are used, why the model is not forecasting a recession, and why inflation expectations and financial-market variables play only minor roles. No specific investment recommendations are made.

• Atlanta Fed GDPNow projects Q2 2025 GDP growth at 2.4%, rebounding from negative Q1.
• Q1 weakness was driven by a large net-export drag and inventory/trade distortions, including gold imports.
• Higgins says the model is not forecasting a recession and professional forecaster odds of a negative quarter remain below 50%.
• Soft survey data can influence GDPNow early in the quarter but matters less as hard data arrive.
• Inflation expectations have risen in Atlanta Fed survey data, but Higgins says this is outside his wheelhouse and minor for GDPNow.
• Business surveys show tariff-related uncertainty may slow hiring and investment, but GDPNow does not directly use those survey results.
• The S&P 500 is one small input among many in GDPNow; financial-market moves have limited predictive weight.
• Higgins describes GDPNow as a statistical, judgment-free model that only forecasts the unpublished current quarter.