top of page
Search

What the Fed’s GDPNow Model Is Signaling About the Economy

  • Writer: David Cutler
    David Cutler
  • Jan 9
  • 2 min read

There’s been a lot of talk about whether the U.S. economy is slowing, stalling, or heading for a “soft landing.” But some of the most recent data suggests something different may be happening.


According to the Atlanta Fed’s GDPNow model, economic growth in 2025 has been stronger than many forecasts anticipated—and it appears to be accelerating as the year goes on.


What is GDPNow?


GDPNow is a real-time economic model published by the Federal Reserve Bank of Atlanta. It updates as new economic data is released, estimating quarterly GDP growth before official numbers are finalized.


It’s important to note:

  • This is not a forecast or final GDP reading

  • The estimate can change as new data comes in


Still, it’s a widely followed tool because it reflects what the data is saying right now.


2025 GDP Growth Snapshot (So Far)

Quarter

GDP Growth (SAAR)

Notes

Q1 2025

-0.5%

Slow start

Q2 2025

+3.8%

Growth rebounds

Q3 2025

+4.3%

Continued acceleration

Q4 2025*

+5.4%

GDPNow estimate (live)

*Q4 is a real-time GDPNow estimate, not a final number.


Key takeaway: The economy didn’t stall — it re-accelerated.


Why the Model Is Picking Up Speed


One contributor to the stronger GDP readings has been improvement in trade data. The U.S. trade deficit recently fell to its lowest level in more than a decade, which can have a meaningful impact on GDP calculations.

In simple terms:

  • A smaller trade deficit means net exports are weighing less on economic growth

  • That can lift overall GDP even without dramatic changes elsewhere


This improvement, combined with steady consumer activity and business investment, is helping push growth estimates higher.


What This Could Mean Going Forward


If these trends hold, it may reshape some common assumptions:

  • A “soft landing” narrative could shift toward economic re-expansion

  • Rate cuts become harder to justify if growth remains strong

  • Financial markets may be underpricing growth risk


None of this guarantees smooth sailing—but it does suggest the economy may be more resilient than headlines have implied.


The Big Picture


Economic data doesn’t move in a straight line, and GDPNow estimates will continue to evolve. Still, when multiple quarters show strengthening momentum, it’s worth paying attention.


The data is getting louder. The narrative just hasn’t fully caught up yet.



 
 
 

Comments

bottom of page