The US economy appears to be shifting from a period of outperformance to a more moderate growth phase in early 2025.
In its latest update, the Federal Reserve lowered its GDP growth forecast for the year to 1.7%, down from the 2.1% projection issued in December. Several major financial institutions — including JPMorgan, Morgan Stanley, and Goldman Sachs — have also trimmed their growth estimates. Part of the adjustment reflects expectations that tariffs and related trade policies could weigh on activity.
Fed Chair Jerome Powell has described the economy as “seems to be healthy,” noting that consumer spending is moderating but remains solid. Forecasters have slightly raised recession probabilities — Goldman Sachs now estimates about a 20% chance of recession, up from 15% — but these figures do not signal an imminent crisis. Other indicators present a mixed picture: Kalshi’s betting markets show roughly 40% odds of recession, the Atlanta Fed’s GDPNow tool at times signals a potential Q1 GDP contraction, and consumer sentiment has softened. Analysts caution that such signals often reflect heightened uncertainty and near-term volatility rather than a definitive turning point.
At the same time, recent datapoints suggest resilience. Retail sales rebounded in February, and the March purchasing managers’ index (PMI) came in stronger than expected at 53.5, indicating expansion in the manufacturing and services sectors. Taken together, these readings support the view that the US is experiencing a slowdown from the especially brisk pace of 2024, but this slowdown looks more like moderation than collapse.
Policymakers and market participants will continue to monitor employment, inflation, consumer spending, and business investment for clearer signs of direction. For now, the balance of evidence points toward a healthy but decelerating economy rather than a sudden downturn.