Coldwater Economics

Coldwater Economics

Notes After a GDP Fall

Capital returns, profits, current signals

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Michael Taylor
May 02, 2025
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The dust isn’t going to settle on the US’ 1Q 0.3% annualized GDP fall for some time, because the immediate cause, the widening trade deficit, was so obviously driven by the threat/reality of President Trump’s tariff chaos praxis. It could herald a recession, or it could simply be reversed sharply in the current quarter. So this piece looks at everything but the fall, at the short and long-term factors which might or might not suggest a recession is at hand.

It looks at return on capital, at Kalecki profits, and at what I think are the more interesting news from the current monthly data. Whilst the collapse in surveyed expressions of economic confidence, if reflected in economic behaviour (not so far), could drag the economy into genuine recession, the longer-term signals remain modestly robust. My guess: no recession yet.

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