The Bureau of Economic Analysis will release its first-quarter GDP report on April 30.
The U.S. economy is expected to have endured a slowdown in the first quarter, in light of tariff shocks and policy uncertainty, economists say.
Imports likely played an outsized role in the GDP report as companies rushed to purchase items overseas before President Donald Trump’s tariffs were implemented.
In the GDP calculations, imports are subtracted from U.S. growth because they account for spending on goods and services made abroad rather than in the United States.
Market watchers have been observing whether deteriorating business and consumer sentiment would appear in the hard data, and some estimates reflect a modest pullback in the broader economic landscape.
One area economic observers have paid close attention to is consumer spending, which accounts for about two-thirds of the economy.
Various purchasing managers’ indexes (PMIs)—monthly surveys of sectors’ prevailing economic direction—have highlighted slowing output, anemic demand, and higher cost pressures for businesses.
Before on-again, off-again tariffs spooked the financial markets, experts had also determined that frigid winter weather and wildfires in Los Angeles would likely affect the data.
“Much of the weakness in consumption in January is related to one-off factors, including the effects of the coldest January since 1988, which weighed on autos spending and a range of spending on recreation goods and services,” said Michael Pearce, the deputy chief U.S. economist at Oxford Economics, in a note.
“The wildfires in Los Angeles were likely a drag in January, along with a hangover from the solid holiday shopping season.
A January to March slowdown could be a one-off, as consumers have signaled they are feeling slightly better about current economic conditions.
According to the University of Michigan’s final April Consumer Sentiment Index, the current conditions sub-index rose from the preliminary estimate. However, it remains at the lowest level in nearly three years.
Looking ahead, economists have trimmed their U.S. GDP forecasts for the rest of the year.
Satyam Panday, S&P Global’s chief economist for the United States and Canada, forecasts real GDP growth will cool to 1.55 percent this year—down from 2.8 percent in 2024—before “picking up after a slow start” in 2026.
“This is because we see uncertainty related to the structure of tariffs abating, the Federal Reserve further easing its policy rate, and partly due to a more favorable growth backdrop in the eurozone that will support expanding U.S. exports,” Panday said in a note.
Jan Hatzius, the chief economist at Goldman Sachs, thinks the president could diminish turbulence by scaling back some of his tariff plans.
Other Data to Watch
First-quarter GDP will not be the only major economic reading this week.
Last week, initial and continued jobless claims remained near their two-month lows, reflecting a persistently tight labor market.
“Recession risks are seen as elevated,” Mark Hamrick, senior economic analyst at Bankrate, said in a statement to The Epoch Times. “But the job market has remained resilient, with the unemployment rate recently in the low 4% range. That is expected to continue with the April reading remaining at or close to 4.2%, as seen in March.”
Economists and policymakers will also digest inflation numbers.
The Fed’s preferred inflation measure, the March personal consumption expenditure (PCE) price index, is expected to have slowed sharply to 2.2 percent from 2.5 percent. Core PCE, which removes the volatile energy and food components, is also anticipated to have eased to 2.5 percent.
“This week’s data docket is likely to paint the picture of slowing growth ahead of the Trump Administration’s tariff shock and declining consumer and business sentiment in the wake of the announcements,” Deutsche Bank economists said in an April 25 note.
However, Bill Adams, the chief economist for Comerica Bank, predicts that the United States will avert a recession this year.
“Comerica’s April forecast assumes that there is a substantial reduction in effective tariff rates and more certainty about economic policy relatively soon, which causes the flow of goods through the economy to normalize,” Adams said in a note emailed to The Epoch Times.
“That would allow the economy to dodge a recession in 2025, although growth is still forecast to slow from 2024’s pace.”
Caution Ahead at the Fed
Investors overwhelmingly expect the Fed to leave interest rates unchanged in a range of 4.25 percent and 4.5 percent at next month’s policy meeting. According to the CME FedWatch Tool, the futures market sees a 58 percent chance of a June rate cut, down from 65 percent a month ago.A chorus of U.S. central bank officials says that the effects of the current administration’s policy changes may not be felt until later in the year. As a result, the Fed could hold rates steady for longer than expected.
In an April 25 interview with Bloomberg Television, Fed Gov. Christopher Waller said he would support rate cuts if unemployment substantially increased.
“It wouldn’t surprise me that you might start seeing more layoffs, a tick up in the unemployment rate going forward if the big tariffs in particular come back on,” Waller said. “I would expect more rate cuts, and sooner, once I started seeing some serious deterioration in the labor market.”
Appearing at an event hosted by the Economic Club of Chicago earlier this month, Fed Chair Jerome Powell acknowledged that monetary policymakers can be patient as they “wait for greater clarity.”
In prepared remarks, Powell stated that the administration’s fiscal, immigration, regulatory, and trade policy could present a “challenging scenario” for the Federal Reserve should inflation and unemployment rise simultaneously.
“If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” Powell said.
While he thinks tariffs could trigger a short-lived increase in inflation, the inflationary effects could “also be more persistent.”
“Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored,” Powell added.
He refrained from presenting a time frame for when the Fed could restart its rate-cutting cycle.
This month, Trump increased his pressure on Powell to lower interest rates as quickly as possible, saying it’s the perfect timing to do so when energy and food costs are trending down and “there is virtually No Inflation.”
