US GDP Falls 0.3 Percent in First Quarter Amid Recession Fears

The US economy is stalling and a new wave of recession fears is dragging down the stock market on Wall Street. Statistics also show that unexpectedly few jobs are being created and that inflation remains at a level that makes it difficult to stimulate growth with lower interest rates.

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US GDP Falls 0.3 Percent in First Quarter Amid Recession Fears
Photo: Seth Wenig AP/TT

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The first quarterly figure for the USA's GDP with Donald Trump back in the White House was a disappointment. The country's GDP shrank by 0.3 percent during the first quarter compared to the previous quarter.

Selling American assets

The market is reacting by selling American assets – which gives rising American long-term interest rates and a clear decline on Wall Street, down nearly 2 percent for the S&P500 index in Wednesday's initial trading.

A minus 0.3 percent for GDP in the first quarter according to the inflation-adjusted figures can be compared to a quarterly growth of 2.4 percent in the USA during the fourth quarter last year. An import boost ahead of the Trump administration's tariff shock and weaker consumption contributed to the development.

A significant slowdown was in the cards, but it became a bit harder than expected. The average prognosis among analysts was minus 0.2 percent for the USA's GDP, according to a compilation of prognoses made by Bloomberg.

Monthly figures from the payroll administrator ADP show simultaneously that only 62,000 new jobs were created in the private sector in the USA in April. It was significantly fewer than expected.

It can be compared to March, when 147,000 new jobs were created in the sector according to revised figures. The average prognosis among analysts pointed to the creation of 115,000 new jobs in April, according to Bloomberg's compilation.

Blaming Biden

President Trump, Republican, quickly went out and blamed the weak development on his predecessor, Democrat Joe Biden.

Trump has previously also directed harsh criticism towards the head of the USA's central bank Federal Reserve (Fed), Jerome Powell, for not lowering the interest rate to get the country's economy going with cheaper credits.

The next Fed decision is expected on May 7, and ahead of this, a new important inflation report from the USA was also published on Wednesday.

It showed that consumer prices in March remained unchanged compared to the previous month, which gave an inflation rate of 2.3 percent according to the so-called PCE measure. Analysts had counted on a PCE inflation rate of 2.2 percent.

The so-called core inflation rate according to the PCE measure fell to 2.6 percent, from 2.8 percent in February – in line with market expectations.

The Fed's inflation target is 2 percent, and an interest rate cut would risk stimulating even higher inflation pressure in the economy.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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