Data Analysis: GDP Contraction Led by Trade Deficit
According to data released by the U.S. Bureau of Economic Analysis (BEA) on the 30th, the initial value of the United States' first-quarter 2025 real GDP quarterly annualized rate contracted by 0.3%. This is not only far below the market's previous expectation of 0.2% growth but also a significant slowdown from the 2.4% growth in the fourth quarter of last year. This negative growth is the first since 2022, indicating a dramatic change in economic momentum.
The primary driver of this GDP contraction was businesses importing large quantities of goods in advance to stockpile in response to the Trump administration's new tariff policies. This led to a 41.3% quarterly annualized import growth rate in the first quarter, partly influenced by non-monetary gold imports, marking the largest increase since the third quarter of 2020.
Since imports are considered a negative item in the GDP calculation formula, the massive import growth contributed a negative 4.83 percentage points to net exports, the second-largest drag in history, second only to the initial outbreak of the COVID-19 pandemic.
The trade deficit in March alone reached $162 billion. This advance stockpiling and import surge due to anticipated tariffs caused a short-term "technical drag" on the first quarter's GDP, potentially masking some of the true economic fundamentals.
Additionally, government spending experienced its first decline since 2022, also causing a slight negative impact on GDP.
Inflation Pressure: The Fed's Dilemma
While the GDP data is concerning, inflation data shows signs of acceleration, undoubtedly complicating the Federal Reserve's monetary policy.
One of the Fed's most closely watched inflation indicators, the core Personal Consumption Expenditures (PCE) price index, reached an initial quarterly annualized rate of 3.5% in the first quarter. This is not only higher than the market's previous expectation of 3.1% but also significantly higher than the previous quarter's 2.6%, representing the fastest increase in a year.
The overall PCE index's quarterly annualized initial value also reached 3.6%, exceeding expectations. Upon publication, this data immediately raised market concerns about inflation's persistence, further reducing the likelihood of a near-term Fed rate cut. After the data release, the market's probability of a May rate cut by the Fed dropped to just 3%.
However, the separately released March monthly data shows the core PCE's year-on-year growth rate at 2.6% and monthly growth rate at 0%, seemingly indicating a slowdown in monthly inflation trends. Yet, the significantly high quarterly data remains a reality the Fed cannot ignore, reinforcing the judgment that inflation pressure persists.
News of Potential Negotiations on US-China Tariff Issues
The market reacted dramatically to this complex data set. Initially after the data release, the U.S. Treasury yield rose to 4.22%, and the stock market showed selling pressure after opening, with the S&P 500 index dropping over 2% and the Dow Jones index plummeting nearly 800 points, briefly falling below the 40,000-point mark.
However, a dramatic rebound occurred in the closing session, with market rumors that the Fed might consider a rate cut due to poor economic data and potential US-China tariff negotiation talks boosting market confidence, causing stock indices to significantly recover.
- Dow Jones Industrial Average closed at 40,669.36 points, up 141.74 points, a 0.35% increase
- S&P 500 index closed at 5,569.06 points, up 8.23 points, a 0.15% increase
- Philadelphia Semiconductor Index closed at 4,230.08 points, surging 33.34 points, a 0.79% increase
- Nasdaq closed at 17,446.34 points, slightly down 14.98 points, a 0.09% decrease
Bitcoin Continues Small-Scale Fluctuations
In the crypto market, Bitcoin initially dropped below $93,000 after opening last night but subsequently rebounded above $94,000. At the time of writing, it was reported at $94,628, continuing to oscillate near its high point without a clear direction.
