Washington: The US economy contracted for the first time in three years in the first quarter, overwhelmed by a flood of imports while companies were running to avoid higher costs of prices and highlighting the disruptive nature of the often chaotic trade policy of US President Donald Trump.
On Wednesday, the report of the gross domestic product (GDP) of the Commerce Department (GDP), however, exaggerated, however, exaggerated the prospects for the gradation of the economy. Although consumer expenditure has slowed down considerably, the rate of growth has remained healthy. Companies have also strengthened investment in equipment.
However, consumer and companies’ expenses probably reflected front loading before importing rights were triggered. As such, the report has strengthened the growing disapproval of Americans from Trump management of the economy while it marks 100 days in office.
Trump won the victory last November on the anxiety of voters over the economy, in particular inflation. Consumer confidence is close to five years and the feeling of companies has landed, while airlines have withdrawn their 2025 financial forecasts, citing uncertainty on non -essential travel expenses due to prices, which, according to economists, will increase costs for businesses and households.
“If the commerce eruption was the result of the pre-purchase companies of imported inputs to beat the prices, the decomposition of the trade balance will reverse in the second quarter,” said Carl Weinberg, chief economist of the high frequency economy. “This will generate a certain growth in GDP. However, corrosive uncertainty and higher taxes – prices are a tax on imports – will rationalize GDP growth in red by the end of this year. ” The gross domestic product decreased at an annualized rate of 0.3% in the last quarter, the first drop in the first quarter of 2022, said the economic analysis office of the trade department in its prior estimate of the first quarter GDP.
It was also increased by a drop in expenses from the federal government, probably linked to the aggressive financing cuts of the Trump administration, marked by mass fire and the triggering of programs.
The economists interviewed by Reuters had planned that GDP had increased at a rate of 0.3% during the January-March period.
However, the survey was concluded before Tuesday’s data showed that the trade deficit of goods had reached a record level in March in the midst of record imports, which prompted most economists to strongly retrograde their GDP estimates. The economy increased at a rate of 2.4% in the fourth quarter.
Imports jumped at a rate of 41.3%, the greatest increase in the third quarter of 2020, when the nation was prey to the COVID-19 pandemic, which fractured the world supply chains. This has erased a modest export increase, resulting in a large commercial difference which cut a record of 4.83 percentage points of GDP.
Imports were motivated by consumer and equipment goods. The BEA said that it had identified and abolished an increase in imports of silver bars as a form of investment in the first quarter.
Transactions in valuables, such as non-monetary gold and money, are not treated as investments and, therefore, purchases of these metals are not included in consumer spending, gross private interior investments or public spending, he said.
An unusually large quantity of non -monetary gold had represented part of the leap in imports in recent months, leading to a large disparity in GDP estimates. The accumulation of stocks has strongly rebounded after two consecutive quarterly decreases, blinking part of the success of the GDP of imports.
American shares have been down. The dollar has won compared to a basket of currencies. The American treasure gives Rose.
Front-loading covers consumption expenses
Consumer spending, which represent more than two -thirds of the economy, increased by 1.8% after 4.0% robust in the fourth quarter. It was supported by spending on services and goods, mainly health care, housing and non-veilable goods. Most households have advanced expenses to avoid higher prices. The labor market which is also cooling, consumers mainly save.
Trump softened on Tuesday the stroke of his car prices thanks to credits to mix decrees with relief from other samples from parts and materials.
A 145% tariff on Chinese products, which sparked a trade war between Washington and Beijing, remains in place, just like a range of other import rights. Trump considers prices as a tool to increase income to compensate for his promised tax reductions and to relaunch an American industrial base that has been detachet for a long time.
Trade in equipment has climbed at a rate of 22.5%. Final sales to private national buyers, who exclude trade, stocks and public spending, increased at a solid rate of 3.0%. But this traditional measurement of domestic demand has been distorted by prices.
Inflation warmed up in the last quarter. The price index of personal consumer expenditure excluding the volatile components of food and energy jumped at a rate of 3.5%, an acceleration compared to the rate of October-December of 2.6%. The so-called inflation of the basic PCE is one of the inflation measures followed by the Federal Reserve for its target of 2.0%.
Economists expect the American central bank to reduce interest rates at a given time this year.
