Consumer spending in the U.S. rose in March, but Q1 GDP report shows contraction

From Yahoo Finance: 2025-04-30 09:05:00

Consumer spending in the U.S. rose 0.7% in March, exceeding expectations, according to the Commerce Department. This surge follows a 0.5% gain in February. Economists had forecasted a 0.5% increase. The Personal Consumption Expenditures (PCE) Price Index was unchanged in March, but prices increased 2.3% year-over-year.

The advance GDP report for Q1 showed a 0.3% contraction, largely due to record imports. Concerns over President Trump’s tariffs have led to fears of stagflation. Stock markets reacted negatively, with the S&P 500 down 1.7%. Bond yields were mixed, with the 10-year yield up 0.5 bp.

Market strategists express concern over weak private sector payroll growth, faster than expected inflation, and negative GDP growth, which point towards a potential period of stagflation. Real Gross Value Added data indicates a decline in production, reflecting economic uncertainty and reduced consumer spending.

Economic analysts predict a 70s-like scenario with weakening growth and persistent inflation, leading to market reactions with bond yields rising and equities falling. The negative GDP growth is attributed to a surge in imports, impacted by trade tariffs. Analysts stress the importance of monitoring labor market data for future economic trends.

Read more: Tame March PCE inflation no salve after downbeat Q1 US GDP report