According to financial analyst Jesse Colombo, the United States economy is obviously headed for a recession. Colombo, who once predicted financial difficulties, now cautions the downturn had already started before Donald Trump’s win.
Based on important economic indicators, his review indicates that the United States could already have started to contract.
Sharp Decline in GDP Forecasts Raises Alarm
Updating in real time depending on economic data, the Atlanta Federal Reserve’s GDPNow model is a big red flag.
- The model forecasted a 2.3 percent first-quarter 2025 growth rate on February 27.
- It had fallen to -1.5% by Friday but by Monday it had dropped to -2.8%, showing a downward trend.
Consumer spending falls and housing market nags.
The decrease in consumer spending, which accounts for over two-thirds of United States economic activity, is a main cause of the slumping economy. First nearly two years ago, consumer spending contracted in January as inflation compelled Americans to reduce spending.
Furthermore adding to the dismal perspective is the downturn in the housing sector. With 15% to 18% of GDP, residential projects—such new home building and renovations—serve as a vital economic force.
Recession Signs in Red Flash
Several market signs compound already existing fears of a forthcoming recession:
- For months, the yield spread on the 10-year/2-year Treasury yields has been negative, historically a sure sign of economic slowdown.
- Also pointing to a financial downturn, New York Fed’s Recession Probability Model forecasts the chance of a recession within the next twelve months.
- On platforms like Polymarket, US recession odds for 2025 are increasing.
Economic slowdown results from aggressive rate increases.
The economic depression Colombo says the Federal Reserve’s strong level raise over the last three years is driving the economy.
- Marking the sharpest rise since the early 1980s, the Fed pushed interest rates from near zero to 5.3 percent.
- As signs of economic weakness emerged, rates were cut to 4.3%, but damage may have already been done.
As seen in the mid-2000s rate increases that helped to trigger the 2008 financial crisis, historical evidence shows recessions follow such tightening cycles.
The Trump tariff instability compounds economic difficulties.
Potentially new tariffs suggested by the Trump government would further undermine things. Seeking to protect American industries, the ex president has implied a more forceful trade strategy.
Still, experts caution that these duties might slow growth even more, therefore raising costs both for companies and consumers.
Worsening economic signs and trade policy uncertainty are fueling worries about a U.S. depression.