The climbing limo method of forecasting future GDP in the United States projects the nation's economic output in the first quarter of 2025 will be around $30.1 trillion.
This estimate assumes the momentum the U.S. economy recorded in growing between 2023-Q4 and 2024-Q2 will be sustained through the current quarter. That assumption is unlikely to hold however considering how 2025 has been unfolding.
There are lots of moving pieces affecting the growth trajectory of the U.S. economy, most of which were set in motion long before the quarter began. As such, it's quite possible the climbing limo forecast will be wrong. Which, believe it or not, is not a bad thing.
Here's why. The climbing limo method is a very simple forecasting technique that projects the level of GDP some three quarters into the future using the nominal GDP figures from five quarters and three quarters before that point in time. Its forecasts therefore represent the momentum of the U.S. economy recorded between the two data points it uses. Deviations between the actual trajectory of GDP and the forecast tells how the momentum of the U.S. economy has changed, which provides useful information even when the differences between forecast and actual values are large.
For example, the biggest deviations it sees typically happen at turning points for the U.S. economy, when it either enters or exits periods of recession. 2025-Q1 may be on the cusp of such a change.
We'll get the first estimates of 2025-Q1 actual GDP trajectory at the end of April 2025. Until then, the following chart shows the climbing limo method's forecast against the recorded nominal GDP over the past 11 quarters for which GDP data has been finalized outside of annual revisions.
Most GDP forecasts are projecting slower growth in 2025-Q1, with some anticipating negative growth at this writing. And that's without any impact from the global tariff war that erupted on 2 April 2025, which falls in 2025-Q2. How big do you suppose the deviation will be?
References
U.S. Bureau of Economic Analysis. National Income and Product Accounts. Table 1.1.5. Gross Domestic Product. [Online Database]. Accessed 6 April 2025.
Political Calculations. Forecasting GDP Using the Climbing Limo. [Online Tool]. 10 May 2005.
Image Credit: Microsoft Copilot Designer. Prompt: "A limousine navigating an uphill, rocky road".
Labels: gdp forecast
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