Mad King Donald is proving a fearsome enemy of excellent financial administration, with the most recent information from the US economic system displaying it went into reverse within the first quarter of this 12 months.
The third and ultimate estimate of March quarter GDP in annual phrases, launched by the Bureau of Financial Evaluation in a single day, shocked US economists with the sharper-than-expected downward revision to development.
The consensus forecast was for no change from the second estimate of a 0.2% annualised fall within the first three months of the 12 months. As an alternative, development was -0.5%. The contraction was sharply down on the two.4% annual development seen within the ultimate quarter of 2024, and the two.8% development for all of final 12 months.
There have been a number of causes. A key one was an enormous surge of imports into the US within the quarter as importers tried to get forward of Trump’s chaotic tariff insurance policies, which detracted from development. Imports grew 37.9%, pushing GDP down 4.7 proportion factors.
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However federal authorities spending additionally dropped by 4.6%, the steepest decline for the reason that first quarter of 2022, as America was popping out of the pandemic. And DOGE cuts, tariff modifications, ICE raids and basic chaos all hit family outlays: shopper spending grew by simply 0.5%, down from the robust 4% within the ultimate quarter of 2024. That’s a pointy downgrade from the Commerce Division’s earlier estimate.
A class throughout the GDP information that measures the economic system’s underlying energy rose at a 1.9% annual price from January via March. That was a stable end result — however a lot decrease than the two.9% within the fourth quarter of 2024, and the Commerce Division’s earlier estimate of two.5% for January-March. That fall noticed some economists begin chopping future forecasts for the remainder of this 12 months, although they don’t see a repeat of the contraction. However to this point, Trump’s financial document is measuring up fairly poorly in comparison with that of Joe Biden.
Whereas bombing Iran and railing on the US media this week, Trump additionally devoted time to a different assault on US Federal Reserve chair, Jay Powell, who had made it clear that regardless of the deteriorating economic system there have been no cuts coming in rates of interest till the Fed was extra satisfied concerning the well being of the US economic system and the weak spot in inflation.
Trump’s newest assault on central financial institution independence noticed the US greenback fall to three-year lows in opposition to different currencies on Wednesday and Thursday. For instance, the greenback has misplaced over 10% of its worth in opposition to the Euro this 12 months, and this week hit its lowest stage since 2021. That’s ostensibly excellent news for Trump’s tariff agenda, as it is going to push up the costs of imports even additional. In doing so, it is going to additional entrench inflation past that launched by Trump’s tariffs — and assure that the Fed sits on the sidelines even longer.
Trump could also be a secure genius in comparison with the cognitively impaired Joe Biden, however Biden’s economic system is starting to look fairly good in comparison with the shambles unleashed within the first three months of this 12 months.
