InvestMacro

By Sophie Mitra, Fordham University 

The Bureau of Economic Analysis released the latest U.S. gross domestic product data on April 30. In the first three months of 2025, it said, GDP contracted by 0.3%. The GDP growth rate captures the pace at which the total value of goods and services grows or shrinks. Together with unemployment and inflation, it usually receives a lot of attention as an indicator of economic performance.

Some economists and analysts said the economy might not be as bad as this rate’s decline might suggest. While this is the first time in three years that GDP has shrunk instead of growing, it is a relatively small decline.

This raises a critical question: Does a relatively small GDP contraction mean the economy is in trouble? I have spent much of my working life studying economic well-being at the level of individuals or families.

What I’ve learned can offer a different lens on the economy than you’d get from just focusing on the most popular indicators, such as the GDP growth rate.

GDP problems

The GDP growth rate has many limitations as an economic indicator. It captures only a very narrow slice of economic activity: goods and services. It pays no attention to what is produced, how it is produced or how people assess their economic lives.

GDP gets a lot of attention, in part, because of the misconception that economics only has to do with market transactions, money and wealth. But economics is also about people and their livelihoods.

Many economists would agree that economics treats wealth or the production of goods and services as means to improve human lives.

Since the 1990s, a number of international commissions and research projects have come up with ways to go beyond GDP. In 2008, the French government asked two Nobel Prize winners, Joseph Stiglitz and Amartya Sen, as well as the late economist Jean-Paul Fitoussi, to put together an international commission of experts to come up with new ways to measure economic performance and progress. In their 2010 report, they argued that there is a need to “shift emphasis from measuring economic production to measuring people’s well-being.”

Considering complementary metrics

One approach is to use a composite index that combines data on a variety of aspects of a country’s well-being into a single statistic. That one number could unfold into a detailed picture of the situation of a country if you zoom into each underlying indicator, by demographic group or region.

The production of such composite indices has flourished. For example, the Human Development Index of the United Nations, started in 1990, covers income per capita, life expectancy at birth and education. This index shows how focusing on GDP alone can mislead the public about a country’s economic performance.

In 2024, the U.S. ranked fifth in the world in terms of GDP per capita, but was in 20th place on the Human Development Index due to relatively lower life expectancy and years of schooling compared to other countries at the top of the list, like Switzerland and Norway.

Monitoring other indicators

Another approach is to rely on a larger number of indicators that are frequently updated. These other data points reflect a variety of perspectives about the economy, including subjective ones that convey personal perceptions and experiences.

For instance, in addition to inflation rates, there is data on stress due to inflation as well as inflation expectations. Both offer insights into people’s perceptions, perspectives and experiences about inflation.

During the COVID-19 pandemic, the annual U.S. inflation rate increased from 1% in July 2020 to 8.5% in July 2022. My research partners and I found, using U.S. Census data, that more than 3 in 4 adults in the U.S. were experiencing moderate or high levels of stress due to inflation at that time and continued to do so even after inflation went down in 2023.

More recently, the Trump administration’s sporadic tariff changes have made future prices more uncertain, which exposes people to risks. That, in turn, makes people adjust their expectations and feel worse off.

The share of consumers expecting higher inflation rates has climbed sharply in 2025, while consumer confidence has declined abruptly. About 1 in 3 consumers expect that there will be fewer jobs created in the next six months, which is almost as low as during the Great Recession of 2007-2009.

Consumers also have negative expectations about their own future income and worry about their own economic status.

At this moment, the U.S. economy has not officially entered a recession – which requires a longer period of GDP contraction than just one quarter. Although unemployment and inflation rates remain relatively low, the broad picture of the economy that takes into account people’s expectations and perceptions is troubling. To be clear, I’m not saying that just because of what the GDP data may indicate.

This article includes material from an article originally published on Aug. 7, 2018.

About the Author:

Sophie Mitra, Professor of Economics, Fordham University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Ross Bennett-Cook, Leeds Beckett University 

The United States is one of the top three most visited countries in the world. The big draw cards – cities such as San Francisco, New York and Chicago and national parks such as Yosemite – have attracted international tourists for decades. This combined with its role as a global business powerhouse meant it had 66.5 million visitors in 2023 – and the 2024 figure is expected to be higher still.

But a lot has changed in recent months, and 2025’s figures may not be as strong. The 2024 reelection of Donald Trump as the president of the United States and the consequential changes in foreign diplomacy and relations, alongside internal cultural shifts, are starting to change global attitudes towards the US – attitudes that appear to be affecting tourists’ desire to visit the US.

In a recent report by research firm Tourism Economics, inbound travel to the US is now projected to decline by 5.5% this year, instead of growing by nearly 9% as had previously been forecast. A further escalation in tariff and trade wars could result in further reductions in international tourism, which could amount to a US$18 billion (£13.8 billion) annual reduction in tourist spending in 2025.

There is already some evidence of travel cancellations. Since Trump announced 25% tariffs on many Canadian goods, the number of Canadians driving across the border at some crossings has fallen by up to 45%, on some days, when compared to last year. Canada is the biggest source of international tourists to the US. Air Canada has announced it is reducing flights to some US holiday destinations, including Las Vegas, from March, as demand reduces.

According to a March poll by Canadian market researcher Leger, 36% of Canadians who had planned trips to the United States had already cancelled them. According to data from the aviation analytics company OAG, passenger bookings on Canada to US routes are down by over 70% compared to the same period last year. This comes after the U.S. Travel Association warned that even a 10% reduction in Canadian inbound travel could result in a US$2.1 billion (£1.6 billion) loss in spending, putting 140,000 hospitality jobs at risk.

An unwelcoming environment?

Some would-be visitors have cited an unwelcoming political climate as part of a concern about visiting the US – including angry rhetoric about foreigners, migrants and the LGBTQ+ community. The Tourism Economics report also cited “polarizing Trump Administration policies and rhetoric” as a factor in travel cancellations.

There are other factors that may influence travellers from, for instance, western Europe, which represented 37% of overseas travel to the US last year. These include US tariffs pushing prices up at home and the US administration’s perceived alignment with Russia in the war in Ukraine.

Research by YouGov in March found that western European attitudes towards the US have become more negative since Trump’s reelection last November. More than half of people in Britain (53%), Germany (56%), Sweden (63%) and Denmark (74%) now have an unfavourable opinion of the US. In five of the seven countries polled, figures for US favourability are at the lowest since polling began in November 2016.

Border issues

Some high-profile cases at the US border could also be putting off tourists. In March, a British woman was handcuffed and detained for more than ten days by US Customs Enforcement after a visa problem. In the same month, a Canadian tourist was detained after attempting to renew her visa at the US-Mexico border. During the 12-day detention, she was held in crowded jail cells and even put in chains.

Mexico is the US’s second largest inbound travel market. Tourism Economics suggests that issues around new border enforcement rules will raise concerns with potential Mexican tourists. During Trump’s first term in office, Mexican visits to the US fell by 3%. In February this year, air travel from Mexico had already fallen 6% when compared to 2024.

Many countries including Canada have been updating their travel advice for the US. For instance, on March 15 the UK Foreign and Commonwealth Office updated its advice for the US, warning visitors that “you may be liable to arrest or detention if you break the rules”. The previous version of advice, from February, had no mention of arrest or detention. Germany has made similar updates to its travel advisory, after several Germans were recently detained for weeks by US border officials.

Multiple European countries, including France, Germany, Denmark and Norway have also issued specific travel warnings to transgender and non-binary citizens, as US authorities demand tourists declare their biological sex at birth on visa applications. This comes as the US has stopped issuing of passports with a X marker – commonly used by those identifying as non-binary – for its own citizens.

Alternative destinations

As thousands of travellers cancel their trips to the US, other destinations are seeing a spike in interest. Hotels in Bermuda have reported a surge in enquiries as Canadians relocate business and leisure trips away from the US, with some predicting a 20% increase in revenue from Canadian visits.

Europe too has reported increased bookings from Canada, with rental properties experiencing a 32% jump in summer reservations when compared to last year, according to some reports.

There are already growing concerns that visa and entry restrictions will disrupt fans and athletes from enjoying 2026 men’s Fifa World Cup, held on sites in the US, Canada and Mexico. Visitors from some countries, such as Brazil, Turkey and Colombia, could wait up to 700 days to obtain visas. The International Olympic Committee has also raised concerns over the 2028 Olympics Games in Los Angeles, although US officials have insisted that “America will be open”.

With mounting visa delays, stricter border enforcement and growing concerns over human rights and anti-minority rhetoric, the United States risks losing its appeal as a top holiday destination. The long-term impact on its tourism industry may prove difficult to reverse.

About the Author:

Ross Bennett-Cook, PhD Researcher, Carnegie School of Sport, Leeds Beckett University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Sergi Basco, Universitat de Barcelona 

The International Monetary Fund (IMF) has just published its World Economic Outlook, and it does not take an expert to deduce that, even among some of the world’s top economic minds, confident predictions are currently hard to come by.

Every spring the IMF and World Bank hold their Spring Meetings in Washington DC: a week of seminars, briefings and press conferences focusing on the global economy, international development and world financial markets. At both the Spring Meetings and the Annual Meeting, held each autumn, the IMF publishes its global economic growth forecasts.

For its 2025 Spring Meeting the IMF has published a baseline forecast, as well as an addendum analysing the tariff events that took place between 9 and 14 April. According to the Fund’s report, world GDP will grow by 2.8% in 2025 and 3.0% in 2026. For the euro area, growth will be 0.8% and 1.2% for 2025 and 2026 respectively.

These forecasts represent a substantial downward revision from IMF figures published just three months ago. Globally, growth in 2025 is down by 0.5% compared to the Fund’s January update, with a reduction of 0.2% for the euro area.

One major shift is key to understanding the most recent IMF report and its pessimistic predictions: we live in a much more uncertain world than we did three months ago.

Trump, tariffs and uncertainty

If one had to sum up the new US tariff policy in a word, “unpredictable” would suffice, as the so-called “Liberation Day” of 2 April 2025 represented the largest tariff increase in modern history.

Just one week later, the US president then made two further announcements. First, a 90-day freeze on tariff hikes, apparently in search of bilateral agreements with the countries to which he had applied tariffs above 10%. Second, that China would be excluded from this exception, with tariffs on its products being raised to 145%.

This freeze means that until July EU goods being sold to the US will have a 10% tariff instead of the 20% that was announced on 2 April. However, the 10% applied by the new US administration is still much higher than the average tariff of 1.34% that was in force before 5 April.

But what will the tariff be after these 90 days? What about in December? What about in 2 years’ time? What goods will be exempted? How far will the trade war between China and the US go? The answer to all of these questions is: nobody knows. This uncertainty is evident in of the IMF’s spring forecast.

Uncertainty is off the charts

The IMF’s world trade uncertainty index is currently 7 times higher than it was in October 2024, much higher than in the pandemic.

As far as the economy is concerned, this uncertainty is far worse than a high but definitive tariff. With a tariff, companies can at least reorganise their production chain, and consumers can look for alternative products. There is a cost, but at least businesses and consumers can plan for it.

However, nobody can calculate these costs today because nobody knows how tariffs will evolve. An American company may decide today to buy a particular product from the EU thinking that the tariff will be 10%, but upon the product’s arrival in the US it turns out the tariff has risen to 100% because a presidential advisor said it would be good for the US economy to raise tariffs on that product.

Unbelievable though it may sound, this appears to be how the tariffs are being decided and enacted. According to one account, the US Treasury and Commerce Secretaries were only able to persuade Trump to freeze recent tariff hikes because Peter Navarro – the president’s economic advisor and tariff ideologue – was in another room at the time.

The end result of this unpredictability is that the best course of action, for consumers and businesses alike, is inaction.

Fear and volatility

It is no surprise that these constant changes of plans are causing great instability in financial markets. Although Trump may have triumphantly celebrated rising stock prices immediately after the tariff freeze was announced, financial markets are now subject to levels of uncertainty and fear similar to those seen during COVID-19.

Five years ago, volatility was associated with increased demand for US government debt due to the “flight to safety” effect: investors selling higher risk investments and buying safer assets, such as gold and government bonds, in times of uncertainty.

Now we are seeing the exact opposite. The price of US bonds has fallen since “Liberation Day”, and this means that investors are selling them. In other words, markets no longer believe that US government debt is a safe asset. Given the role of the dollar and US debt in international markets, this paradigm shift may generate even more financial instability down the line.

Supply chains are breaking (again)

COVID-19, the last major global economic crisis, has one thing in common with the current situation: disruption of global supply chains. During the pandemic it was confinement that forced production to stop. Today, it is the imposition of tariffs.

However, there is another major difference. During COVID people knew it was a matter of time before vaccines became available and normality returned. Today, instability in financial markets comes not from any virus, but from President Trump’s own advisors selling him all manner of plans to protect US economic interests.

About the Author:

Sergi Basco, Profesor Agregado de Economia, Universitat de Barcelona

This article is republished from The Conversation under a Creative Commons license. Read the original article.