The US economy contracted in the first quarter, raising concerns about a potential recession. The Commerce Department reported that GDP shrank by 0.3%, a sharp reversal from the 2.4% growth in the previous quarter. The downturn was attributed to a 41% surge in imports as companies prepared for President Donald Trump’s tariffs, as well as reduced consumer spending and government expenditures.
Scott Helfstein, head of investment strategy at Global X ETFs, commented, “The continual sequence of policy reversals has led to very high levels of uncertainty for businesses and investors.”
Despite the disappointing economic data, the stock market ended the day with mixed results. The S&P 500 gained 0.15% to close at 5,569.06, while the Dow Jones Industrial Average rose 0.35% to 40,669.36. However, the Nasdaq Composite fell 0.09% to 17,446.34.
President Trump addressed the economic contraction, stating that it had “nothing to do with tariffs” and was a result of previous administration policies.
Dow rises amid economic contraction
He wrote on Truth Social, “This is Biden’s Stock Market, not Trump’s.
I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden ‘Overhang.'”
Trump also hinted at a potential trade deal with China, expressing hope for improved relations with Beijing.
“At a certain point, I hope we’re going to make a deal with China,” he said, adding that he likes Chinese President Xi Jinping and was “saddened to hear” about China’s economic struggles. On the macroeconomic data front, personal consumption expenditures (PCE) in the US rose 0.7% month-on-month to $134.5 billion in March, exceeding expectations. The Fed’s inflation indicator, the core personal consumption index, was also up 2.6% on an annual basis, meeting estimates.
The mixed market performance and economic indicators underscore the complex interplay of current conditions and future expectations, making it a compelling area for continued observation.