February 2025 Economic Forecast: A Soft Economy Continues That Has Been Stagnant For The Last Four Months

My expectations are for an economic decline in the coming months - and then improvement

EconCurrents‘ Economic Index insignificantly improved. Inflation remains unchanged compared to the last four months – a strange situation after the Federal Reserve declared progress on curtailing inflation. We do not forecast a recession in the near term. Read on to understand the currents affecting our economic growth.

Overview of this Economic Forecast

This post will summarize the:

• special indicators,

• leading indicators,

• predictive portions of coincident indicators,

• review of the technical recession indicators, and

• interpretation of our index – EconCurrents Economic Index (EEI) – which is built of mostly non-monetary “things” that are indicative of the direction of the Main Street economy at least 30 days in advance.

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Economic trends remain unchanged until a new force acts on them.

President Trump has promised major change - and we need to brace for some level of negative impact.

I am reminded from my years of managing mega-projects that change is always disruptive. Change makes things get worse before they get better. Unlike the government, the private sector wants to accurately know the impacts of change so that they can keep adjusting course to minimize negative impacts. The government historically only wants to fill your head with unsubstantiated words that everything is improving. I can only hope the Trump administration begins to act like the private sector and collects data in real-time to accurately measure all impacts. This is the major caveat to all economic forecasts in the coming months.

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The economy continues to be stratified with some sectors going gangbusters, other sectors barely above recessionary levels, whilst other sectors are in recession territory. I am reminded that recession indicators are based on models produced using historical data – and significant annual revisions by the US Census, BLS, and the BEA change how we interpret the data. The bottom line is that we can never fully trust current data or trend lines as correct. Let’s say that all forecasts are no more than quantified opinion.

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The Federal Reserve has made three recent reductions to the federal funds rate. The private sector borrowing rates have changed a little suggesting it was premature to reduce rates. EconCurrents follows the Federal Reserve Bank of Atlanta’s Underlying Inflation Dashboard which uses data from the US Bureau of Economic Analysis, the Federal Reserve Bank of San Francisco, and the Federal Reserve Bank of Dallas. Inflation has modestly declined earlier this year but, interestingly, the downward movement in some of the measures of inflation released in September, October, November, December, and January 2025 were matched by upward movement of others. Inflationary pressures remain high - and inflation continues to impact any economic forecast.

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