US economic output remains on track to rebound in the second quarter following the slight decline in Q1, based on the median estimate for a set of GDP nowcasts compiled by CapitalSpectator.com.
The near-term economic outlook is still uncertain due to still-evolving effects from tariffs, but so far the current quarter profile is holding on to a recovery from the fractional 0.3% slide in GDP reported for Q1.
Today’s Q2 nowcast is +1.6%, based on the median. Although that’s down from our initial nowcast earlier in the month, the data suggests that the first quarter stumble will not roll on to Q2.
Despite today’s upbeat profile, a fair degree of skepticism is still recommended. It’s still early in the second quarter and so the full effect of the trade war has yet to filter into the economic numbers that will inform the final estimate of GDP for Q2. Nonetheless, it’s encouraging that early estimates have bounced for the current quarter via figures published to date.
JP Morgan yesterday lowered its estimate of US recession risk below 50%, explaining that the recent de-escalation of trade tensions “will likely reduce” the odds of a downturn this year.
“The administration’s recent dialing down of some of the more draconian tariffs placed on China should reduce the risk that the US economy slips into recession this year. We believe recession risks are still elevated but are now below 50%,” said Michael Feroli, chief U.S. economist at the bank.
The US Business Cycle Risk Report has continued to estimate a low probability that a US recession has started or is imminent.
But in the current environment, much depends on how the May profile for data compares – a month that will provide a fuller reflection of the trade blowback. Cautious optimism prevails, but it remains to be seen if the incoming data alters the analysis.