Atlanta Fed’s GDPNow Crashes to -2.4%; Fastest Decline Since COVID Lockdowns
- The Atlanta Fed’s GDPNow model plunged from +4.0% to -2.4% in just four weeks - its sharpest drop since 2020.
- Soft data had been weakening for weeks, but now hard data – like retail sales, exports, and government spending - are flashing red too.
Why it matters: Among all Federal Reserve bank GDP forecasts, the Atlanta Fed’s GDPNow is historically the most reliable. The sudden drop is alarming. Soft indicators like consumer sentiment have been weakening for weeks. Now, hard data – like retail sales, exports, and government spending - are flashing red too. If this trend continues, economic growth could be slowing harder and faster than many expected.
Now the Deep Dive: GDP expectations have collapsed fast. But should we be surprised?
The economy is under pressure from weak trade (surging U.S. trade deficit), a softer consumer, and reduced government spending.
I like the ATL Fed’s GDPNow because – as I mentioned above - it’s historically the most reliable of the Fed banks in tracking GDP trends (though not perfect).
Think of it as a real-time guess at U.S. economic growth. It updates often - at least five times a month – and is based purely on data, with no opinions or adjustments.
- It’s important to note that GDPNow is not the Atlanta Fed’s official forecast. It’s just a running estimate.
- The recent drop marks the sharpest since the COVID lockdowns.
To put this decline into perspective, just four weeks ago, GDPNow showed +4.0% growth for January–March.
Now? It’s -2.4%. . .
That’s how fast things can change - sending markets scrambling to reprice estimates and assets.
Of course, forecasting the economy is tough. Even the best models struggle with so many moving parts.
Thus, this number could bounce back with strong data (it was -2.8% just three days ago). Or it could sink even lower.
- For context, the average monthly gold flow in 2022–2023 was just $1.7 billion.
- Gold is excluded from GDP calculations since it’s not consumed or used in production.
This distortion could mean the GDP drop won’t be as bad as it looks once that is calculated.
Either way, it’s worth watching.
Figure 1: Federal Reserve Bank of Atlanta, March 6th 2025
A 129-Point Credit Score Plunge? The Hidden Student Loan Issue Lurking Around The Corner
- Millions of student loan borrowers could see their credit scores drop by up to 129 points, pushing 2.3 million into subprime status.
- With 32% of likely delinquents currently holding prime or super-prime scores, lenders may reassess risk – likely tightening credit and slowing the economy.
What you need to know: For the first time since before the pandemic, delinquent student loan borrowers will face credit score drops - potentially up to 129 points. Over 9 million borrowers, or 43% of government loans, are currently behind on payments and expected to be reported as delinquent between now and June 2025, per VantageScore analysis3.
Why it matters: Student loan delinquencies will start hitting credit reports between now and May - with 2.3 million borrowers expected to fall below 600 into “subprime” status, per VantageScore. This could be a major credit shock, as 32% of likely past-due borrowers currently have prime or super prime scores, forcing lenders to reassess FICO ratings as many of their least risky borrowers suddenly turn subprime.
Now the Deep Dive: I found this recent data from Vantage very worrying as it signals millions of Americans (those with student debt) are about to see their credit scores plunge.
I warned about this back in September 2024 in “Student Loan Crisis: A Growing Problem That May Soon Hit Credit Scores." But even I didn’t expect it to be this bad.
Why? Because some delinquent borrowers could see their scores drop by 129 points. That’s devastating - especially for those in the prime (661–780) or super-prime (781–850) range.
- For context, someone with a 781 score could drop below prime (~650) if they fall behind on payments.
I argued in September that FICO scores were artificially inflated by the student loan payment pause. Now that payments are back and millions are struggling, lenders will rethink borrower risk. And that could tighten credit and slow the economy.
Here are some of the potential macro impact implications. . .
- Tighter Credit Access – such large declines in credit scores drop could push borrowers into subprime, making loans harder to get and much more expensive, thereby reducing disposable income (as more money must go to interest).
- Weaker Consumer Spending – Lower scores and rising delinquencies may force cutbacks on spending as borrowers need to save more and banks may reduce credit limits (how much people can borrow), thus negatively impacting corporate sales.
- Higher Default Risks & Bank Exposure – banks may face increased risks of delinquencies, loan losses, and tighter credit conditions, increasing stress in the banking sector.
- Housing Market Hit – Many younger buyers, especially those with student debt, may no longer qualify for mortgages, cooling home sales.
A credit score is like a reputation - slow to build, fast to ruin.
And at a time when economic data already shows signs of weakening, this could add even more pressure.
Or it could be just a minor blip in the big picture.
Who knows. But I’ll keep a close eye on this trend and update you if anything changes.

Figure 2: Bloomberg, February 2025
Germany’s Fiscal U-Turn: A Game Changer for Europe’s Economy?
- Germany is set to abandon its strict fiscal constraints, unleashing hundreds of billions in spending that could boost growth but also raise debt costs and inflation.
- This shift could reshape the Eurozone economy, with ripple effects on markets, interest rates, and Europe’s response to global challenges.
What you need to know: Germany’s potential fiscal U-turn – switching from fiscal constraint to spending hundreds of billions - could revive its struggling economy and re-invigorate an anemic Eurozone. This has sent European stocks much higher, and the euro had its best week since 20094.
Why this matters: On Tuesday, the likely-to-be German Chancellor - Friedrich Merz - and other political leaders announced plans to reform the country’s long-standing “debt brake” policies - which limited how much the government could take on – in order to allow for higher defense spending to aid Ukraine and limit potential Russian aggression. They also unveiled a €500 ($535 billion) special fund for infrastructure. A bigger deficit implies more spending, which could translate into higher growth. It’s also pushing German bond yields (aka Bunds) much higher as debt issuance and inflation are expected.
Now the Deep Dive: This is a potential game changer for Europe's biggest economy and could spark life into European growth.
Long story short, Germany’s economy has been stagnant for years now – which has negatively affected the Eurozone.
Now, in economic theory, when an economy is weak, the government should run a bigger deficit – the idea being that if the private economy is stagnating, the government can spend, injecting money, and try to re-spark sales, growth, and prices.
But Germany - scarred by its post-WWI hyperinflation, where a loaf of bread soared from 250 marks in January 1923 to 200 billion marks by November - has long resisted deficit spending.
- For comparison, the U.S. ran a roughly ~6.2% deficit-to-GDP in 20246, which is far, far higher.
In fact, when forming the EU and Eurozone, Germany pushed for the Maastricht Treaty (1993), which laid the foundation for the euro and set strict economic convergence criteria for all members - such as:
- 3% deficit-to-GDP limit.
- 60% debt-to-GDP cap.
While this promoted fiscal discipline, it also curbed growth by restricting government spending, thus reinforcing austerity (reduced government spending) during downturns, and limiting monetary flexibility.
- Many countries - like France, Italy, Spain, Greece, Hungary, and Portugal - have far exceeded these limits with little enforcement, making the Maastricht Treaty more of a symbolic rule than a real constraint (although it is supposed to be enforced).
Regardless, Germany’s changing tone for greater spending is a major move for its economy and all of the EU – one with both risks and rewards.
The Good: Higher deficits could fund infrastructure, green energy, and defense, boosting growth, jobs, and corporate profits across the Eurozone (typically a boon for equity markets – just take a look at the chart below of major EU defense stocks).
The Bad: Higher deficits could push bond yields higher (which they have so far), increase Germany’s debt burden, fuel inflation, and lead to higher borrowing costs for Germans and Europeans.
So, keep a close eye on Germany and the EU’s fiscal moves - this could be pivotal after a decade of anemia.
*NOTE: China is looking to sharply boost its deficits to re-spark consumption. This will be huge for the global economy, and I will cover it in an upcoming Morning Pour.

Figure 3: Morningstar, March 2025
Anyway, who knows what will happen?
This is Just some food for thought as we watch how these trends develop.
As always, we’ll be keeping a close eye on things. Enjoy the rest of your weekend.
Sources:
- GDPNow - Federal Reserve Bank of Atlanta
- Massive Gold Influx at Root of Record US Trade Gap Largely Excluded From GDP - Bloomberg
- Student Loan Delinquencies Will Begin to Impact Credit Scores
- German Fiscal Bazooka Sends Euro, Bund Yields Surging | Morningstar
- The debt brake rule that helped collapse Germany's government
- Federal Surplus or Deficit [-] as Percent of Gross Domestic Product (FYFSGDA188S) | FRED | St. Louis Fed
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