There were weeks of breathless commentary about 5% GDP growth in the US in the fourth quarter and now here we are — less than 24 hours from the release — and the tracker has been revised all the way down to 3.0%.

The quarter started off with a super-strong trade balance reading for October but it was all smoke and mirrors around pharma exports due to tariffs and that was followed by a normalization of trade flows in Nov/Dec. Now GDP is looking like it will be at 3.0%, which also happens to be the economists’ consensus. In light of today’s trade balance number and revisions lower in inventories, I see downside risks.

In any case, the quarterly numbers so far in 2025 have been

• Q1 2025: -0.6%
• Q2 2025: +3.8%
• Q3 2025: +4.4%

A reading of 3.0% would put annual growth real growth at 2.6% on a Q4/Q4 basis. That’s a nice year for the world’s biggest economy but it’s happening with a deficit at 6% of GDP. You could probably strip 4-5 points off GDP if the US was forced to run a balanced budget.

From the GDPNow release:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 3.0 percent on February 19, down from 3.6 percent on February 18. After this morning’s releases from the US Census Bureau and the US Bureau of Economic Analysis, an increase in the nowcast of fourth-quarter personal consumption expenditures growth from 2.4 percent to 2.5 percent was more than offset by decreases in the nowcasts of fourth-quarter real gross private domestic investment growth from 6.2 percent to 6.1 percent and the contribution of net exports to fourth-quarter real GDP growth from 0.62 percentage points to 0.02 percentage points.