Bullish indicating open at $55-$60, IPO prices at $37
Investing.com - U.S. gross domestic product shrank by an annualized 0.5% in the first quarter, according to a final revision of the data on Thursday which confirmed the first contraction since 2022 and suggested possible headwinds from sweeping U.S. tariffs.
In the prior revised figure released in May, January-to-March GDP contracted by 0.2%, marking a reversal from growth of 2.4% in the final three months of 2024.
A flood of imports, kick-started by businesses looking to lock in orders and avert higher costs before the implementation of U.S. President Donald Trump’s aggressive trade agenda, weighed on the number. According to the Commerce Department’s Bureau of Economic Analysis, which releases the data, imports are a substraction in the calculation of GDP.
Decreased government spending also impacted growth, although it was partly offset by elevated investment and consumer expenditures.
The 0.3-percentage point drop in the final GDP figure primarily reflected downward revisions to consumer spending and exports, the BEA said. This was partially counterbalanced by imports also being revised lower.
While this surge of tariff front-running has since cooled and inflation and labor market data have indicated a relatively muted trade impact, some worries remain that the effect of Trump’s levies is still to be seen. Many economists have flagged that the tariffs could drive up inflationary pressures and weigh on broader activity.
In a recent note, analysts at Barclays (LON:BARC) predicted that the impact of the duties will likely ripple through the global economy in the second half of 2025. Meanwhile, Federal Reserve Chair Jerome Powell this week reiterated the central bank’s decision to adopt a wait-and-see attitude to future interest rate changes until more clarity emerges around the tariffs.
Separately on Thursday, weekly claims for first-time unemployment benefits fell by more than expected to 236,000, while the four-week moving average -- which aims to account for volatility in the weekly total -- edged down slightly. But continuing claims jumped by 37,000 to 1.974 million, the highest level since November 2021.
"This mix of numbers suggests that while companies aren’t aggressively cutting headcount, the pace of hiring has cooled substantially," analysts at Vital Knowledge said in a note.
Investors will be keeping close tabs on the personal consumption expenditures price index, due out on Friday, for a fresh glimpse at the state of U.S. inflation. The gauge is the Fed’s preferred measure of price gains.