welp

A recession is defined as 2 consecutive quarters where the GDP is negative.

@creator Did you mean to say "GDP growth is negative"? Or is this going to be a big gotcha for traders who didn't read closely? 🙃

Market for each quarter! Ṁ10k subsidy

given this is largely a market on q2 growth now… shameless self promo!

@brod isn't it more about Q3/Q4? Genuine question

@Odoacre Q1 real growth was negative, so this can resolve yes only if either

• q2 is negative or

• q2 is positive but q3 and q4 are negative

first case seems more likely

From the analyses going around of what contributed to the GDP estimate, it seems importers stocking up on goods that they haven't sold to consumers yet counts as negative GDP.

Which means by the same token, importers selling said goods to consumers in the subsequent quarter, without importing the same amount, will count as positive GDP! So look out for that, YES bettors!

The wonders of spreading your accounting identities over over multiple quarters.

Edit: apparently they track inventories too, which should be able to account for this? Now I'm more confused.

@chrisjbillington I actually don’t know but if consumers stock up on buying in this quarter, so the second quarter has positive growth. Wouldn’t that make it more likely the third and fourth quarter contracts due to decreased consumer spending?

@NeoMalthusian well if the second is spuriously high then the third by comparison will more likely be negative, just due to the higher baseline, even if consumer spending is normal.

The above comment is about wholesale importers stocking up and keeping stuff in warehouses, not consumers importing goods.

Reduced consumer spending on imports doesn't affect GDP, as GDP is a measure of domestic production. Imports only come into the calculation to be subtracted off total consumer spending in order to ensure they're not counted. So that spending doesn't count - except spuriously when the change in spending and change in import volume don't happen in the same quarter.

@chrisjbillington I doubt that Q2 will be negative because of people like my family who spent $40,000 buying everything they will buy for the next five years.

I'm not giving my money to the US government to waste on the things it does. If I have to pay tariffs, I just won't buy nonessential stuff.

Q3 will be sharply negative after everyone who pulled forward the purchases stopped buying.

@SteveSokolowski Sir, there are 145% import tariffs on China and 125% tariffs on US exports to China. Fill my limit order.

@chrisjbillington I mean, theoretically importers stocking up on goods shouldn't lead to negative GDP even if they're warehoused because changes in inventory factors into GDP calculations

https://pages.stern.nyu.edu/~nroubini/bci/inventories.html

@SteveSokolowski I also doubt that Q2 will be negative because they tried driving consumers to panic buy unless it’s like slightly more than -1%, but I get what Chris is saying about importers having goods stored in customs.

@NeoMalthusian I still don't agree with this argument. I'll only agree so far as to say that Q2 will be positive.

I know that having lost so much money in the stock market (and I still largely mitigated those losses by selling calls), I would have cancelled all purchases and vacations even if my legal case weren't going to take up 100% of my time during the summer. There are a multitude of reasons why many people are already cutting back on things in anticipation of the price increases.

It's not only about the tariffs - it's about the worries that the tariffs will lead to job losses and stock declines, which perpetuates the cycle. It's worry itself that cases the recession.

The stock market set off the 1929 catastrophe, and whether this one gets as bad as 1929 or not, the stock market is the causative factor here too in causing people to dramatically cut back.

@spiderduckpig that makes sense.

So is it imports brought forward that aren't consumer goods, that can artificially depress the GDP estimate? Some commentators talking about business investment, i.e. businesses importing equipment and whatnot. This would contribute to anomalously high imports but not inventories (yet - not until the investment leads to increased production).

Or is there still an argument about warehouses goods, because the value of inventories of imports doesn't include domestic value add?

Edit: nope on investment, inventories are just one category of overall investment, which is counted. I am not really seeing how brought-forward imports drags down anything given how things should net out. Yet this is what some commentary is saying.

@chrisjbillington What happened is that for Q1, it wasn't really a down quarter - imports were just moved forward; that skews the stats.

For Q2, it won't be a down quarter either, because people like me are buying everything they can.

For Q3 and Q4, there will be a reduction in demand from the stock market crashing and job losses. In addition to that, there will be people who want to buy but cannot because businesses simply abandon products overseas that cannot be sold at a profit and wind down operations, leading to product shortages, especially in cheap overseas stuff like Christmas decorations and clothing.

So this market might have better odds after Q2 when it "seems like it's over." But the big tariffs don't take effect until July 2 and the Chinese tariffs won't have an impact until end of June.

At the end of this year the bottom is going to absolutely fall out and it's going to look like Depression-era statistics, and there are going to be people who are shocked (!) that they somehow didn't see it coming. If my May 2 calls are assigned, I'm certainly not buying back in for a long time.

@SteveSokolowski I understand the argument about imports moving forward, it's just that when you look more closely at how this factors in, it seems like it should come out in the wash and not affect the final number. Though obviously imperfect/non-simultaneous data collection could explain why things might not net out perfectly within the same quarter.

I think when reasoning about the effects of the tariffs on GDP, you have to be careful to ensure you're talking about effects on domestic production, which is what GDP is a measure of. Consumers being unable to buy e.g. Christmas decorations I would not think would affect domestic production at all. Christmas decorations are not an input into domestic production. In fact, the inability to buy Christmas decorations might mean consumers have more money to spend on other things, thus all else equal, demand for domestic goods might increase.

Further, simple importers of Christmas decorations and clothing going out of business I could imagine pushing on GDP in different directions. I can't imagine importers are adding much value (that counts for GDP purposes) to imported consumer goods. Therefore them ceasing to do this doesn't affect GDP much. What happens next depends on the job market - if freed up labour from this remains unemployed, then aggregate demand will be down and that will probably negatively impact GDP. Whereas if the freed up labour ends up doing anything that counts toward GDP, it might positively impact GDP.

Which will happen? In times of doom and gloom, employers don't want to hire new people and expand to new things, and this can become a self-fulfilling prophecy because of the higher unemployment itself reducing aggregate demand. This is my preferred way to think about recessions - this self-fulfilling failure to utilise the economy's capacity, as opposed to a drop in that capacity (that can happen too, but is a different sort of phenomenon). Fighting recessions means central banks (and governments, ideally) using their tools to create optimism to break (or pre-empt) the cycle of pessimism. They have gotten a lot better at this since the great depression, to the extent that I kind of don't think recessions of this kind can be reliably predicted. The government maybe being unreliable (and the cause of the pessimism) is a complication, to be sure, but I still think central banks are powerful and have learned new lessons with every recession so far, making them less likely every time.

Obviously many imports are inputs into domestic production, and this is the main non-self-fulfilling-prophecy type of reason GDP might drop. That's I think what we're betting about, and it's a real problem. I'm still inclined to bet against it, though - for one, you could get a step drop and then increasing GDP from that baseline as firms adapt to the new context. Usually a lot of low hanging fruit getting used to something new. So a drop might be just a single quarter, not two.

Whereas the cascading effects of unemployment and pessimism - yeah that happens sometimes, but to the extent it's predictable, I think it's preventable by central banks. So I'm happy to discount that probability to near base rates.

I don't think there will be "Depression-era statistics", without cherry-pick finely enough after the fact, and if you want to think about how to operationalise that claim, I'd probably bet against it.

@chrisjbillington this is the kind of content I come to manifold for. Well done!

@chrisjbillington I agree with what you said except that you made some omissions:

1. You undersold the impact of the stock market on the economy by not mentioning it at all. Many people have lost a significant portion of everything they worked for, and further declines are expected to occur as companies go bankrupt. Stock ownership tends to be associated with wealth, and the richest are the ones who would have spent the most.

2. The implication of your view is that it is possible to change the economy to produce these things domestically. It is not. There already exists a labor shortage and there are no human-operated factories. Nobody will invest to build these factories because if the tariffs disappear, as they have repeatedly, the human-operated factories would immediately need to close because they are unprofitable. Your timeline is off - those problems can't be solved this year.

The most likely outcome of the tariffs is that it accelerates AI and moves the creation of strong AGI forward by a year or more. This is a good outcome, as it will save millions of lives who would otherwise have died due to aging and disease. But it is bad for people who are both healthy and also live paycheck to paycheck.

There doesn't need to be "humanoid robots" to operate these automated factories. There are plenty of manipulator arms that can just be upgraded with the software AGI multimodal models available today. Factories like this are competitive with human-operated factories overseas regardless of tariffs, so there will be a boom in AI automation.

The conclusion is that there aren't going to be new "domestic manufacturing jobs" created. Most of the job losses in this recession will just be permanent. Rather than a slow transition to the post-human world, the tariffs will essentially slam the United States into it later this year.

@SteveSokolowski Nice to see you Mr. PA swing state boy.

@SteveSokolowski

1. Totally disagree with this framing. Stocks being down is primarily a prediction of slowdown impacting profits - it's an effect of that (predicted) outcome, not a cause. Stocks going down will impact people's spending a little bit through the wealth effect, but most people's stock holdings aren't funding consumption.

   I agree that if stocks were still down a tonne, that would mean the smart money was predicting a slowdown. However stocks are basically flat for April now, so it seems traders are now predicting "meh".

2. I don't believe this, no, and don't think my comment implies it. Domestic production may indeed decline. But it might do so in such a way that there aren't two consecutive quarters of negative growth. And any decline has to exceed whatever growth in domestic production was also happening, in order to actually net negative in a given quarter.

AI automation revolution this year sounds way too soon to me!

https://www.cnbc.com/2025/04/30/gdp-q1-2025-.html

The first estimate of Q1 GDP was negative. This market will resolve YES if the first estimate of Q2 GDP is negative at the end of July, regardless of what happens in the rest of the year.

Heavily (Ṁ60k) subsidised short-fuse meta-forecasting (resolves in ~3 weeks):

https://www.abc.net.au/news/2025-04-16/china-halts-orders-of-american-boeing-planes-trump-tariffs/105181864?utm_source=abc_news_app&utm_medium=content_shared&utm_campaign=abc_news_app&utm_content=link