The American economy shrinks under the leadership of Donald Trump – according to the latest macroeconomic data. In the first quarter, the annualized Reading of GDP dynamics was negative, which in the last decade only 3 times, and the measure of inflation preferred by the Fed was significantly increased.
WIEK 2025, the gross domestic product of the United States recorded a decrease of 0.3 percent. In an annualized approach – results from the initial reading published by the Government Office of Economic Analysis (BEA).
It was a result different from the expectations of economists who expected a low reading and clearly worse than a quarter earlier, but still assumed an increase of 0.3 percent. The published reading is the worst result since the first quarter of 2022.
Americans present GDP dynamics differently than Europeans. Annalize short -term data, i.e. they transform it into year -round. In short, the monthly value is multiplied 12 times and quarterly 4 times. We wrote more about this in the text “What is an annualized GDP? We translate.”
Negative GDP dynamics is rare in the USA. Over the past decade, it took place only three times: in the first two quarters of 2020, when Pandemia Covid-19 stopped the global economy, including a record drop in GDP by 28 percent. In the second quarter, as well as in the first quarter of 2022, when the federal reserve began a series of interest rate increases.
Winning according to Trump
On Wednesday, 101 day passed from the return of Donald Trump to the office of the President of the USA. The swearing in took place on January 20 this year. Therefore, most of the time in the first quarter of the United States economy was the influence of the policy of the new administration. The fact that the USA has been clearly signaled in the USA has already been signaled by the Federal Reserve Bank from Atlanta, which updates the so -called GDP forecast.
In his forecasts there was even a breakdown. Although at the beginning of the quarter he forecasted a quarterly growth of GDP exceeding 2 percent, from March early March he began to indicate that the American economy would shrink in the first quarter by nearly 3 percent, which was translated by the current data, among others regarding the ISM index and investment in construction.
“Usually the new administration does not change so much federal policy, especially in the first 100 days of the presidency,” said the AFP agency professor of economics at George Washington University Tara Sinclair. “But this one is different (…) I think it is quite clear that there have been drastic changes that directly weaken the economy,” she added.
Secondly, a weaker result was expected as a result of the observed trend in the construction of inventory and increased import of goods to the USA before the expected changes in customs policy. Let us remind you that the so -called The Liberation Day, when Donald Trump announced the closes, took place on April 2. “As one would expect, foreign trade downwards, supplies strongly up. This is an obvious effect of customs policy,” economists from mBank wrote on x.
🇺🇸 American GDP in Q1, however, with a slight downside, although much smaller than the model pointed out @Atlantafed. As one would expect, foreign trade firmly ⬇️, wrestling strongly in⬆️. This is an evident effect of the customs policy. pic.twitter.com/smfnkefsnz
– mBank Research (@mbank_research) April 30, 2025
Crazy quarter in the USA
“Having preliminary data, we already know that the first quarter was crazy: imports increased by 41%, and net exports deducted from the growth of almost 5 percentage points. Imports itself does not reduce GDP, something had to be on the other side of the transaction – now we know that this is an increase in stocks (over +2 percentage point) and probably investments in computer equipment (+1 percentage point of PKB). The rest probably hid somewhere in private consumption (which looks weak), or flew through a sieve of national accounts.
“However, this does not change the fact that soft data from the USA looks terrible and hard deteriorate. The local economy will slow down this year” – they added.
The publication takes place after the Fed meeting of March 18 and 19, at which decision -makers presented mixed perspectives of economic projections for the USA. The forecast for GDP growth was significantly revised, which this year is to be 1.7% (against 2.1% assumed in December). Wednesday's data is one of the most important quarterly readings before the next week planned (6-7 May), another Fed meeting, because in addition to the dynamics of GDP, the report of the Economic Analysis Office also includes new inflation data, according to the PCE Core (Personal Consumption Expenditures), without food and energy.
Here, however, the statistics did not have good information, because the measure of PCE Core in the first quarter jumped up to 3.5 percent. with 2.6 percent In the fourth quarter of 2024, it was also higher than forecasts, which assumed a 3.3 % increase in prices. The report also includes an GDP price index – commonly called GDP Defender – which measures the inflation of all domestic goods and services, including exports, but excluding imports. It was expected to increase to 3.1 percent, compared to 2.3 percent. In the last three months of 2024, however, the result was also significantly higher and amounted to 3.7 percent.
“What can worry from the Fed's point of view is the PCE deflator, which clearly reflected in Q1. However, we emphasize that at present the most important for the FED is the labor market. The appearance of serious scratches on his image can encourage the resumption of foot reductions faster” – noted analysts from mBank.
What can worry from the Fed point of view is the PCE deflator, which clearly reflected in Q1. However, we emphasize all the time that the labor market is currently the most important for the FED. The appearance of serious scratches on his image can encourage the resumption of foot discounts faster. pic.twitter.com/4xqz0vgfzk
– mBank Research (@mbank_research) April 30, 2025
The data shown from the US worsened the moods on the gutter. Term contracts for American indexes before 3pm lost about 1.3 percent, in the case of those based on S&PC and nearly 2 percent. in the case of Nasdaq. In Europe, most of the indexes gained, they fell under the line. The decreases deepened the indexes on the WSE, retreating from record levels. Over 3 percent She lost the price of copper, and in effect of serious fears of recession, gold racing raised. The profitability of 10-year US bonds quickly gained 9 pproc., But then corrected this ankle growth.
The data published today are the first regular respect of the US GDP for the first quarter. These statistics will be subject to one more regular revision, which will be published exactly in a month, May 29.
Michał Kubicki
