The latest update from the Atlanta Fed’s GDPNow tracker shows an increase in the estimated annualised GDP growth for the fourth quarter of 2025, rising to 5.4 percent from 5.3 percent the previous week. However, this quarter remains difficult to assess accurately due to disruptions caused by the extended US government shutdown.
This revised estimate incorporates recent data releases from the US Census Bureau, the Bureau of Labor Statistics, and the Federal Reserve Board of Governors. Notably, the forecasts for real personal consumption expenditures growth and real gross private domestic investment growth have been adjusted upwards, from 3.1 percent to 3.2 percent, and from 5.1 percent to 6.4 percent respectively. Conversely, the expected contribution of net exports to GDP growth has decreased slightly, from 1.99 percentage points to 1.88 percentage points.
Despite this optimism from the GDPNow model, economists at Pantheon Macroeconomics remain sceptical. In a recent client note, Chief US Economist Samuel Tombs described the forecast as “highly questionable” and “far too optimistic.” Pantheon’s main criticism is that the GDPNow model functions as a “black box,” producing figures without applying reasonable judgment regarding irregularities in data or emerging economic trends.
Currently, there is very little reliable data for December, limited information for November, and gaps even in October’s data. Historically, the GDPNow model has an average forecasting error of 1.2 percentage points at this stage and has been off by as much as 3.6 points in previous quarters.
One major point of contention is the projection of 3.1 percent growth in consumer spending, which Pantheon finds hard to justify. The model predicts 1.8 percent growth in goods spending, whereas Pantheon’s own analysis, along with Bloomberg’s Second Measure indicator, suggests goods spending is flat. Similarly, the model anticipates 3.7 percent growth in services spending, but Pantheon’s high-frequency indicators—such as hotel occupancy rates, TSA passenger volumes, and Google searches related to subscription cancellations—suggest a slowdown in this sector.
Pantheon also highlights a curious discrepancy in the model’s assumptions. The GDPNow estimate includes a large 2.0 percentage point contribution from net foreign trade and a 0.8 point boost from inventories, despite these two components usually moving in opposite directions historically.
Separately, former President Trump promoted the quarterly annualised GDP figure as if it were an annual growth rate at the Davos forum. Even if the 5.4 percent growth for Q4 is confirmed, and the Q3 figure remains at 4.3 percent (with the final Q3 report expected tomorrow), the overall GDP growth for the year would amount to approximately 3.16 percent. While this represents solid economic performance, it falls short of being exceptional.
Original Source: Adam Button of investinglive.com
