The Noise Before the Storm

A not-great GDP report, but most of the Trump effect lies ahead

I’m traveling and won’t be able to get a proper post up until tomorrow. So just a quick comment on the GDP numbers released earlier this morning.

The headline number was negative, which isn’t great news, but you shouldn’t read too much into that. Remember, measured GDP shrank in the 1st quarter of 2022, and that didn’t presage a recession — in fact, that was probably just statistical noise:

The components of the GDP release tell us more. Imports were up sharply, as were inventories; this looked a lot like businesses stocking up in anticipation of tariffs.

But the two important things to realize are that quarterly advance estimates are noisy, involving a lot of interpolation and guesswork, and that these data cover the period up to March 31. Trump’s insane tariff announcement (I still have trouble calling it Liberation Day) came two days after the last day covered by these numbers.

We may well have a Trumpcession, but these data don’t tell us much about whether that’s in the pipeline.