US GDP Contracts 0.3% In Q1 As Tariff Fears Drive Record Import Surge

Consumer Spending Slows But Remains Positive Consumer Spending, WHICH Accounts for About Two-Thirds of GDP, Rose at A 1.8% PACE. While Positive, This Was A Noticeable Slowdown from the Stronger Performance in Late 2024. Goods Spending Was Mixed, With Gains in Nondurables Partally Offset by Weakness. Services Spending Remoned Firm, Led By HealthCare and Houshing-Related Categories.

Inflation Pressure Intensifies The Report Showed Signs of Building Inflationary Pressure. The Personal Consumption Expenditures (PCE) Price Index ClimBed 3.6%, Up from 2.4% in the Previous Quarter. Excluding Food and Energy, Core Pce Rose 3.5%, Suggesting Inflation Remains Sticky. This complicates of the Federal Reserve’s Path Forward, as Higher Inflation May Limit the Central Bank’s Ability to Ease Rates to Support Growth.

Mixed Contributions from Investment and Government Spending Private Inventory Investment Provides A Tailwind, Particularly in the Wholesale Drug Sector. Real Final Sales to Private Domestic Purchassers – Seen As A Better Gauge of Underlying Demand – Grew 3.0%, Slightly Above Last Quarter’s 2.9%. Government Spending Declined, Weighed by Reduced Federal Defense Outlays, Thought State and Local Expenditures Offset.

Market Forecast: Bearish Short-Term Outlook Traders Should Brace for A CAUTOOUS NEAR-TRIM ENVIRONMENT. The Contraction in GDP, Combined with Elevated Inflation and Trade Uncertainty from Incoming Tariffs, Points to Downside Risk for Equities and Continued Dollar Valativity. Unless Consumer Activity Rebounds or Trade Pressures Ease, The Near-Term Growth Outlook Remains Bearish.