From Investing.com: 2025-06-12 06:56:00

The US economy saw a contraction in the first quarter due to tariff front-running, but a subsequent drop in imports may lead to 4% growth in the second quarter. Uncertainty surrounding tariffs and jobs is slowing private demand growth, with a forecast of 1.6% growth for 2025 and 1.3% for 2026. Trade volatility is expected to mask domestic demand trends for the year. Concerns about inflation, job market, and equity market volatility are impacting consumer sentiment, leading to a rise in the household savings ratio and a slowdown in labor demand in key sectors.

Trade tensions and tariff-induced inflation are expected to impact the US economy, with goods prices likely to rise from July onwards. The Federal Reserve is cautious about cutting interest rates due to higher tariff rates putting pressure on costs and prices. Financial markets are pricing in 50bp of Federal Reserve interest rate cuts this year, with the Fed expected to wait until convinced before implementing cuts. President Trump’s Big Beautiful Bill, which is still pending in the Senate, may provide a fiscal giveaway, but it may not significantly boost economic activity.

Overall, trade swings, tariff uncertainty, and the impact of the Big Beautiful Bill are creating challenges for forecasting US economic growth. The economy is facing slowing private demand growth, inflation risks, and uncertainty in trade policies and government spending. The Federal Reserve is monitoring the situation closely, with financial markets pricing in interest rate cuts. The future trajectory of the US economy will depend on how these factors evolve in the coming months.



Read more at Investing.com: Trade Swings Mask Cooling US Demand Growth