The latest economic data for the U.S. shows a mixed picture - Well.............

1st May 2025

We need to take many of the predictions with a pinch of salt but here goes. For balance and need to laugh we have attached a Seth Myers video that possibly contains more truth.

The U.S. economy contracted by 0.3% in the first quarter of 2025, marking the first decline in three years. This was primarily due to an increase in imports and a decrease in government spending.

Stock Market Performance: The Dow Jones Industrial Average rose slightly by 0.28%, while the S&P 500 edged up 0.06%, and the Nasdaq fell 0.1%.

Personal Income Growth: Personal income increased by 0.5% in March 2025, with disposable personal income rising by the same percentage.

Inflation Concerns: The personal consumption expenditures (PCE) price index increased by 3.6%, with core inflation (excluding food and energy) rising 3.5%.

Job Market Outlook: The April jobs report is expected to show 130,000 new jobs added, but concerns remain about hiring slowdowns.

Reviewing the most recent data for Q1 2025 alongside late‑2024 figures reveals some notable shifts:

GDP Growth: At the end of 2024, the U.S. experienced a robust growth with real GDP rising by 2.4%. In contrast, Q1 2025 saw a contraction of 0.3%. This reversal is largely driven by an upsurge in imports—a drag on GDP—and a reduction in government spending that wasn't offset enough by gains in consumer spending, investment, and exports 2.

Inflation Trends: The personal consumption expenditures (PCE) price index, a key measure of inflation, accelerated significantly. While the fourth quarter in 2024 saw a 2.4% increase, Q1 2025 recorded a 3.6% increase. This indicates that inflationary pressures have tightened since the previous period, pointing to a faster-paced rise in consumer prices than was experienced at the end of last year.

Consumer Spending: Consumer spending, as reflected in real final sales to private domestic purchasers, continued to register growth—3.0% in Q1 2025 compared to 2.9% in Q4 2024. Although the increase is marginally higher this quarter, its positive impact was insufficient to counterbalance the drag from higher imports and lower government spending.

Other Highlights: Personal income still grew at a healthy rate (0.5% in March 2025), suggesting that the underlying consumer fundamentals remain reasonably strong. However, the combined effect of a cooling GDP and accelerating inflation points toward a shift in economic momentum when compared to the previous year's tail-end performance.

Forecasts for upcoming U.S. quarters suggest a cautious rebound after the Q1 2025 contraction, though the outlook remains clouded by tariff-induced uncertainties and muted business investment. Here's a closer look at what many analysts are expecting:

Q2 2025 - Modest Rebound: Q1 finished with a contraction of about -0.3% largely driven by a surge in imports and lower government spending. Moving into Q2, many forecasters expect a slight rebound. Consumer spending—which tends to show signs of pent-up demand—might turn marginally positive. While precise quarter‐on‐quarter numbers vary, projections hint at modest positive growth, perhaps in the 0.2%-0.4% range, as businesses and households adjust to the new trade realities. This rebound, however, is likely to be fragile in the face of persistent tariff pressures and lingering supply chain disruptions 2.

Q3 2025 – Gradual Stabilization: By the third quarter, as markets begin to digest the full impact of policy shifts and trade tensions, the outlook improves slowly but remains subdued. Some analysts forecast that growth could edge higher, potentially reaching closer to 0.5% or even up to 1% on a quarter‐on‐quarter basis. Yet, continued uncertainty in trade policy—and the impact on business investment decisions—could cap the recovery's strength. The overall upturn would depend significantly on whether tariff policies ease even slightly or if businesses adjust their spending plans accordingly .

Q4 2025 – Near-Stagnation Signals: Looking further ahead, certain projections, including those noted by firms like EY, suggest that the final quarter may struggle to build momentum. Forecasts here point to very tepid growth—often near stall speed (around 0.2% on a year-over-year basis)—as the cumulative negative effects of reduced government spending and cautious private investment persist. These predictions imply that even if temporary signals of recovery emerge in Q2 and Q3, the underlying economic challenges may leave Q4 relatively muted .

Overall Annual Outlook: When these quarter-by-quarter dynamics are aggregated, the consensus for 2025 suggests real GDP growth in the vicinity of 1.1% to 1.4% for the full year. This moderate annual pace underscores the resilience of consumer spending to some extent but also highlights how tariffs, trade uncertainty, and cautious business sentiment are weighing on the broader economic recovery.

The sensitivity of these forecasts to shifts in trade policy is important—any easing in tariffs or breakthrough in trade negotiations could improve confidence and spur more robust investment, while continued uncertainty may keep growth near these modest levels.