Q4 GDP revised up, but trade drag is looming over Q1

Summary

GDP came in a tad stronger in Q4 than in earlier estimates and profits rose by the most in two years. But separately reported trade data for February give further credence to the argument that trade is set to take a massive bite out of Q1 GDP growth.

Q4 is ancient history, Q1 is shaping up to be ugly

In this third estimate of fourth quarter GDP growth, while there was some movement under the surface, headline economic growth quickened slightly to a 2.4% annualized rate (chart). The bulk of the new data is profits, which we break down below.

By the third look at GDP, the data are inherently backward looking. That is particularly true today given all that has happened in the first few months of 2025. Q4 feels like ancient history. In separately released data out this morning, we learned the advance goods trade balance narrowed much less than expected. Industrial supply imports (mostly metals) surged massively in December and January posting the two biggest monthly increases on record in back-to-back months. Today's data for February were remarkable in that industrial supply imports did not crash back down to earth and instead came down only slightly (chart). Firms kept racing to get needed supplies in February in an effort to get it in ahead of eventual tariffs.

Going into this morning's data releases, we had estimated net exports would weigh down Q1 GDP by 2.2 percentage points. The upshot is that trade is now poised to exert an even larger drag than feared on first quarter GDP growth.

Download The Full Economic Indicator