Preliminary estimates for the US economic activity in the second quarter point to a recovery following a mild decline for GDP in the first quarter. The obvious caveat: Q2 data is still sparse and so there’s a high degree of uncertainty about how the quarter will evolve as the effects of tariffs move through the economy in the weeks ahead.
Meanwhile, the initial view for Q2 GDP is encouraging. The median nowcast for the current quarter indicates a 2.1% increase in GDP, based on estimates from several sources compiled by CapitalSpectator.com. If correct, the economy will report a robust recovery from the mildly negative 0.3% decline in Q1. But this early in the current quarter, with a global trade war raging, the current Q2 nowcast should be viewed cautiously, to put it mildly.
A key risk factor: the trade war is starting to effect the economy, which suggests that incoming Q2 data could dramatically shift the nowcasts in the coming weeks.
For example, a sharp slide in US exports is showing up at most US ports, according to the trade tracking consultancy Vizion. The consultancy analyzed US export container bookings for the 5-week period before President Donald Trump’s tariffs began and the 5 weeks after the tariffs took effect.
“We haven’t seen anything like this since the disruptions of summer 2020,” said Kyle Henderson, CEO of Vizion. “That means goods expected to arrive in the next six to eight weeks simply won’t. With tariffs driving costs higher, small businesses are pausing orders. Products that once moved reliably are now twice as expensive, forcing importers into tough decisions."
The initial profile for Q2 offers a ray of hope that US economic resiliency will continue in some degree, but these are early days. The full run of data in the current quarter will provide a test of how tariffs are affecting economic activity. Based on the slide in exports, it’s reasonable to manage expectations down, despite the upbeat Q2 nowcast.