Commented: US Q1 GDP -0.2% vs -0.3% Forecast (QoQ)

Commentary:

Economic data for Q1 2025 indicates a 0.2% contraction in GDP on an annualized basis — the first negative quarter since 2022. Key drivers of the decline include a record trade deficit of $162 billion in March, largely due to front-loaded imports ahead of new tariffs announced by President Trump, and weakened consumer demand. However, business investment in equipment rose impressively by 22.5%, signaling some resilience in the corporate sector.

These figures put pressure on the Federal Reserve (Fed) to consider an earlier interest rate cut, even though inflation remains above the 2% target. Markets are now pricing in a 64% probability of a rate cut in June and expect a total 1 percentage point reduction by year-end.

The U.S. dollar remains under pressure, with the DXY index down approximately 9% year-to-date. Goldman Sachs warns that foreign demand for dollar-denominated assets may further weaken unless the dollar depreciates more. U.S. equity indices have also reacted negatively—the S&P 500 and Nasdaq declined, with S&P 500 futures falling 0.7% early Wednesday, despite a prior six-day rally driven by hopes for easing trade tensions.

Overall, current economic indicators and Fed policy are contributing to market uncertainty, with investors closely watching for further signals from the central bank and developments in trade policy.

U.S. GDP (QoQ) Q1 2025:

• Actual: -0.2%
• Forecast: -0.3%
• Previous: 2.4%