The American economy contracted in the first three months of 2025 on a wave of import at the start of the president Donald TrumpThe second mandate of his duties as he warns a potentially expensive trade war.
Gross domestic productA sum of all the goods and services produced from January to March, dropped at an annualized rate of 0.3%, according to a report by the trade department Wednesday adjusted Wednesday for seasonal factors and inflation. It was the first quarter of negative growth since the first quarter of 2022.
Economists interviewed by Dow Jones were gaining a gain of 0.4% after GDP increased by 2.4% in the fourth quarter by 2024. However, in the last day, some Wall Street economists changed their negative perspectives, largely due to an unexpected increase in imports as companies and consumers tried to advance april.
Imports increased by 41.3% for the quarter, driven by an increase of 50.9% of goods. Imports subtract from GDP, so that the contraction of growth may not be considered negatively given the inverse potential of the trend in the following quarters. Imports have taken more than 5 percentage points for reading the title. Exports increased by 1.8%.
A slowdown in consumer spending and a sharp drop in federal spending also contributed to the low number of GDP in the midst of Elon Musk's efforts to the government's ministry of efficiency.
“Perhaps a part of this negativity is due to a precipitation to call on imports before the rise in prices, but there is simply no way for political advisers to run sugar. Growth has simply disappeared,” said Chris Rupkey, chief economist at Fwdbond.
People buy in a Manhattan store on July 27, 2023 in New York.
Spencer Platt | Getty Images News | Getty images
Consumer spending slowed down during the period but were still positive. Personal consumption expenditure increased by 1.8% for the period, the slowest quarterly gain since the T2 of 2023 and down compared to a gain of 4% in the previous quarter. However, a separate report has shown that spending increased 0.7% in March, greater than the estimate of 0.5%.
In addition, private interior investment has skyrocketed during the period, up 21.9%, mainly pulled by an increase of 22.5% of equipment expenses which could also have been tariffs.
Federal government spending decreased by 5.1% for the quarter, razing about a third of point percentage on GDP.
The report is before the next uncertain stages of Trump's trade policy.
In early April, the president announced 10% of prices between the sides of American trade partners as well as a menu of “reciprocal” selections against dozens of nations. On April 9, Trump suspended these functions for a 90 -day negotiation period which has not yet given results, although the administration officials said that certain transactions were close.
“Not surprising that GDP took a blow in the first quarter, mainly because the balance of exchanges exploded while companies imported goods like crazy prices.” It is worrying, but not alarming because it could have been due to bad weather and an increase in expenses at the end of last year. “
Future scholarships Slipped as a result of the report while the treasure yields increased above.
In a social article of truth according to the report, Trump did not specifically address GDP, referring rather to the “Buyer market of Biden, not to that of Trump”.
“Prices will soon start to launch and companies are starting to move to the United States in record number,” wrote Trump. “Our country will explode, but we have to get rid of the” overhang of Biden “. It will take some time, has nothing to do with the prices, only that it has left us bad figures, but when the boom starts, it will be like no other.
Higher inflation
The report provided cross -signals for the federal reserve before its political meeting next week. Although the number of negative growth can push the central bank to consider reducing interest rates, the readings of inflation could give decision -makers.
The price of personal consumer expenditure index, the FED's preferred inflation measure, recorded a gain of 3.6% for the quarter, up compared to the 2.4% increase in the fourth quarter. Excluding food and energy, the basic PCE increased by 3.5%. Fed officials consider that basic reading is a better long -term trends.
A related reading known as the chain weighted price index, which adjusts to changes in consumer behavior and other factors, increased by 3.7%, well above the 3%estimate.
The Commerce Department later reported in the morning that the PCE price index in March was little changed. Annual reading of annual inflation was 2.3% for the month, slightly higher than expected, while Core was 2.6%, as expected.
The markets are still prices in a drop in rates at the June meeting and a total of four movements by the end of the year, a potential indication that the Fed will favor economic growth in relation to inflation.
Also on Wednesday, the Bureau of Labor Statistics said that its employment index increased 0.9% in the first quarter, in accordance with expectations.
While the economy always adds jobs and consumers still spend, the GDP report increases both the danger of recession and Trump's challenges while negotiating agreements with American business partners.
The traditional rule of recession is of two consecutive negative districts, although the official arbiter, the National Office of Economic Research, uses a definition of “a significant drop in economic activity that spreads in the economy and lasts more than a few months”.
Next markets will seek data from non-Farm BLS payroll, which will be published on Friday. The ADP payroll processing company reported on Wednesday that private hiring had increased only 62,000 in April.
