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Following a disappointing first quarter, the question on everyone’s mind is: are we officially in a recession? According to Patrick Higgins, a Policy Advisor, Economist, and the creator of the GDPNow model at the Federal Reserve Bank of Atlanta, the answer isn’t so straightforward.
In a recent interview with David Lin, Higgins shed light on the Atlanta Fed’s projection for Q2 2025. While a negative Q1 performance raised concerns, Higgins’s team is forecasting a significant rebound, projecting a robust 2.4% economic growth for the second quarter.
However, Higgins also emphasized the importance of understanding the nuances of economic forecasting. He highlighted the methodological distinction between “hard” economic data, such as manufacturing output and retail sales, and “soft” data, like consumer confidence surveys.
The accuracy of economic projections depends heavily on the type of data used and the models employed. The GDPNow model at the Atlanta Fed, known for its real-time tracking of economic activity, relies heavily on hard data, providing a relatively accurate and up-to-date assessment of economic growth.
While the projected 2.4% growth in Q2 is certainly encouraging, Higgins cautioned against complacency. “It’s crucial to monitor the data closely as it evolves,” he stressed. “Economic conditions can change rapidly, and it’s vital to remain vigilant and adapt our outlook as new information becomes available.”
So, will Q2 officially pull the US economy out of a recession? Based on the Atlanta Fed’s current forecast, the answer is likely yes. However, the situation remains fluid. Keeping a close eye on incoming economic data, particularly hard data, will be critical in determining the true trajectory of the US economy in the months to come. While economists like Higgins offer valuable insights, the future, as always, remains subject to change.
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