The US economy ended in the first three months of 2025 at the beginning of President Donald Trump's second term with an import boost with a potential costly trade war.
The gross domestic product, a sum of all goods and services produced from January to March, fell according to a report by the trade department with an annualized pace of 0.3%, which was adapted to seasonal factors and inflation on Wednesday. This was the first quarter of negative growth since the first quarter of 2022.
Economists surveyed by Dow Jones had sought 2.4% after a win of 0.4% after GDP in the fourth quarter of 2024. Last day, however, some economists of Wall Street changed their prospects to negative growth, especially due to an unexpected increase in imports, as a company and consumers, to transferring the Trump tariffs at the beginning of April.
In fact, imports rose by 41.3% for the quarter, which is due to an increase in goods by 50.9%. Imports subtract from GDP, so that the contraction of growth may not be considered negative as negative if the trend is reversed in the following quarters. The imports took more than 5 percentage points from the heading. Exports rose by 1.8%.
“Perhaps part of this negativity is due to the hurry to bring imports before the tariffs rise, but there is simply no way for political consultants to protect this. Growth is simply disappearing,” said Chris Rupey, chief economist at FWDBonds.
On July 27, 2023, people shop in New York City in a shop in Manhattan.
Spencer Platt | Getty Images News | Getty pictures
Consumer expenditure slowed down in the period, but were still positive. Personal consumption expenditure increased by 1.8% in the period, the slowest quarterly win since the second quarter of 2023 and compared to a profit of 4% in the previous quarter.
In addition, private domestic investments increased in the period of 21.9%, which is mainly due to an increase in expenditure of 22.5%, which could also have been a tariff.
The Federal Government's expenditure decreased by 5.1% in the quarter and shaving about a third percentage point to GDP.
“No wonder that GDP achieved a success in the first quarter, especially because the trade balance was blown up, as a company was imported like crazy for front tariffs. The more meaningful number for the future of expansion was consumer expenses and it grew at a relatively weak pace,” said Robert Frick, corporate industry with the Federal Credit Union. “This is worrying, but not alarming, since it could have been due to bad weather and an expenditure of expenditure at the end of last year.”
The Börse Futures decreased according to the report, while the returns of the Ministry of Finance were higher.
In a social contribution of the truth after the report, Trump did not specifically enter into GDP, but instead referred to “bidens stock market, not to Trumps”.
“Tariffs will start soon, and companies move to the USA in record numbers,” wrote Trump. “Our country will be booming, but we have to get rid of the bids 'overhang'. This will take a while, has nothing to do with tariffs, only that it has left us with bad numbers, but when the boom begins, it will be like no other.
Inflation higher
The report provided Cross signals for the Federal Reserve before its political session next week. While the negative number of growth could urge the central bank to reduce interest rates, the inflation values could take advantage of political decision -makers.
The price index of personal consumption, the preferred inflation measure of the FED, achieved a profit of 3.6% for the quarter, which has increased by an increase in the fourth quarter by 2.4%. With the exception of food and energy, the core PCE rose by 3.5%. Fed civil servants consider the core as a better measurement of long -term trends.
A related reading known as a chain weighted price index that adapts to changes in consumer behavior and other factors rose by 3.7%, well above the estimate of 3%.
The markets are still a pricing at the June meeting and a total of four steps until the end of the year, a potential indication that the FED arrives the economic growth before inflation.
On Wednesday, the Bureau of Labor Statistics also reported that its employment cost index rose by 0.9% in the first quarter, which corresponds to expectations.
While the economy is still adding jobs and still spending consumers, the GDP report increases both the risk of recession and the missions for Trump while dealing with the US trading partners.
The traditional rule of thumb for the recession is two consecutive negative quarters, although the official referee, the national office for economic research, “uses a significant decline in business, which is distributed through the economy and takes more than a few months”.
The next markets next will search for the BLS wage and salary billing data that will be published on Friday. The processing company ADP of the salary statements reported on Wednesday that private settings in April only increased by 62,000.
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