### Will a “Trumpcession” Occur? Atlanta Fed Model Shows Negative GDP Growth, But Don’t Panic
The Atlanta Federal Reserve’s model predicts that GDP could shrink by 2.8% in the first quarter of 2025. Unsurprisingly, this forecast has triggered a wave of headlines. Reuters highlighted concerns by suggesting that the Atlanta Fed’s warning signals a “Trumpcession,” while Barron’s noted a continued decline in the GDPNow estimate. Forbes further fueled recession fears, pointing to multiple indicators suggesting increased economic risks in 2025.
Meanwhile, inflation and tariff concerns are weighing on consumer sentiment. The University of Michigan’s Survey of Consumers reported that consumer sentiment stood at 64.7 in February 2025, marking a 10% drop from the previous month. Additionally, the Bureau of Economic Analysis reported a 0.2% decline in consumer spending for January 2025.
However, John Chang, Senior Vice President at Marcus & Millichap, urged a more measured response in his recent video, “Is the Economy Slowing?” He acknowledged the concerning economic data but noted that each data point has underlying factors that could temper the overall impact.
### **Consumer Sentiment and Political Bias**
Chang pointed out that consumer sentiment data tend to have a political bias. A portion of the survey assesses whether respondents believe the government is performing well. He noted that Democratic respondents who felt the government was doing a good job dropped by 30 percentage points, while Republican approval increased by 24%. Independents showed little change.
In essence, consumer sentiment appears to reflect political leanings rather than an objective economic outlook. While these perceptions could influence rental housing and consumer spending, Chang suggested that the overall effect may be neutral, given the country’s relatively balanced political divide.
### **The Role of Imports, Exports, and Tariffs**
Trade remains a significant component of GDP growth, and ongoing uncertainty regarding tariffs continues to impact markets. Chang emphasized that businesses reliant on imports must account for tariff risks.
In anticipation of possible tariffs, manufacturers and retailers ramped up imports, causing a surge in net imports. As a result, net exports—a key GDP metric—are expected to be negative for the first quarter. However, by the second quarter of 2025, businesses will likely reduce imports, which could mitigate GDP declines.
### **Looking Ahead**
Chang remains cautiously optimistic, predicting economic growth will return to positive territory in the second quarter, potentially rebounding to around 4%. Taking a long-term perspective of five to seven years, he suggested that today’s political and economic turbulence is unlikely to have a lasting impact on commercial real estate returns.
While concerns about a potential “Trumpcession” are dominating headlines, Chang’s analysis underscores the importance of considering broader economic trends before jumping to conclusions.
