The GDPNow model estimates the real GDP growth for the second quarter of 2025 at 2.2 percent as of May 6. This is an increase from the previous estimate of 1.1 percent on May 1.

Recent data releases from the US Bureau of Labor Statistics, the US Census Bureau, and the US Bureau of Economic Analysis have affected the model. The nowcasts for second-quarter real personal consumption expenditures growth rose from 1.9 percent to 3.3 percent, while real private fixed investment growth increased from 1.3 percent to 3.6 percent.

Gdpnow Update Schedule

The GDPNow update is scheduled for Thursday, May 8. This update may further adjust these projections based on new economic data.

Put simply, the GDPNow forecast picked up pace. Within just five days, the real GDP growth estimate for Q2 2025 doubled from 1.1% to 2.2%, a shift driven largely by improved expectations around household spending and business investment. The model responds immediately to fresh data, and those inputs—especially on consumption and fixed investment—have shown stronger activity than expected.

Personal consumption expenditures, which play an outsized role in driving GDP, are now forecast to grow by 3.3% instead of 1.9%. This means consumers have either continued spending through economic uncertainty, or recent wage trends and employment conditions have provided a cushion against cost pressures. That adjustment alone added notable weight to the GDP estimate. Fixed investment didn’t trail far behind. It jumped from an earlier estimate of 1.3% growth to 3.6% in a matter of days. This reflects more robust capital expenditure by private firms, possibly in construction, equipment, or intellectual property products. When businesses increase investment, it can suggest not only confidence in future demand but also a need to expand capacity now, not later. So we take it seriously when that figure shifts sharply.

For those of us tracking derivative markets, moves like these don’t just suggest that risk appetite is changing—they tell us where that appetite is being aimed. Stronger-than-expected consumer spending and business investment feed into inflation considerations, interest rate expectations, and ultimately market volatility.

Market Implications

Powell’s Fed is on watch: this sort of growth momentum is unlikely to pass unnoticed. A 3.3% rise in consumption implies inflation pressures may linger, even if headline prices moderate. If investment continues to accelerate, borrowing costs matter more. Forward rate pricing may react accordingly. That leaves us with a market finely attuned to short-term moves in economic trajectories. Rates trades may become more directional. Swaps spreads could widen. And vol sellers might need to be nimble.

Burns may view this as a warning shot for strategies built on a soft landing being delivered neatly. For us, the response cannot be passive. It would be unwise to maintain high convexity exposure without factoring in the rate-anchoring effect a stronger Q2 may eliminate. Models assuming a steady, predictable slowdown will need to be rebalanced quickly as new consumption and investment figures revise estimates upwards.

More data will land before the May 8 model update, and that will add more weight. But even before then, the direction is clear. Q2 performance is running hotter. If you’re set up assuming softness, this is a point to consider increasing hedge roll-down or reassessing the slope of rate curves you’re positioned on. Treasury volatility isn’t dead, and this revision could be the beginning of a more active spell than what we saw in the first quarter.

There’s been a sharp change in just a handful of days. We don’t have the luxury to wait and see if it settles down. Reaction time becomes a strategy of its own.

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