US economy shrinks, but is it temporary?
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Why did the US GDP contract in Q1 and what role did pre‑tariff import spikes play?
Well the US economy shrank in Q one whilst Europe managed to push ahead. But it's not necessarily bad news for the United States. It's largely because of a last-minute rush on imports ahead of tariffs. Now there are high inventories to run down. So does it all spring back or not? We'll look at that and the market reaction to it today. Also, a look at yesterday's Aussie CPI and Labor Day for many parts of the world today, so it could be a quiet one. Bank of Japan decides well we're not actually expecting them to decide anything, but lots of earnings numbers. Meta, Microsoft and Qualcomm today. It's Thursday, it's the first of May twenty twenty five. It's the morning call from Nab. Good morning. And Caterpillar earnings, incidentally, they were out before the market opened.
They reported weaker than expected earnings in Q one uh and they have lowered their guidance as well, but their share price opened higher. Investors obviously were expecting worse, uh, but then they got hit like everything else by the US G D P numbers today. So equities uh were falling as a result of that, down one percent for the Nasdaq at one stage, just an hour ago in fact, uh but it's closed only just in the red. The S P closed down naught point three percent. The Dow, which was uh half percent lower again not so long ago, it's closed up a third of one percent. So a real turnaround in that last hour of power in the United States. And in the UK, the FTSE one hundred, well, well before that, it was up naught point four percent, the DAX is up naught point three percent, the cat carried up half a percent.
The US dollar is slightly higher, it's up a third of one percent on the DXY, the Aussie is also Also up naught point three percent, the pound down naught point six percent, the euro down half percent, uh ten year treasury yields down two basis points, yields falling faster in Europe though, ten year guilt in the UK down four basis points, down five in Germany and France and much of the rest of Europe. Aussie ten years were down two basis points yesterday to four point one six percent, down just one basis point further than that on futures overnight, and big falls in oil. Well for WTI anyway, it's down three point seven percent, down one point eight percent for Brent, which is just over sixty three a barrel now.
WTI actually heading towards fifty eight US dollars a barrel. Uh so you know bad news, it's as though uh something's happening in America. Well, let's talk to Nab Sky Masters in Sydney. And oh yes, GDP.
How are equity markets reacting to the US GDP surprise and what explains the late‑day rebound?
Uh it was well it was actually forecast to fall in Q one, maybe not quite as much as the year. It has fallen. It's fallen uh naught point three percent, so this is the first contraction in the US economy that we've seen for quite a while.
Good morning, Phil. Yes. Um, yeah, you have seen um pretty mixed reaction actually in in markets overnight. But if I just answer your question on on the GDP print uh as you said it it did contract in in the quarter down point three um market forecast was for a fall of point two so uh not not significantly below market expectations but confirmation of of that contraction in in growth in in q one and recall Um the cre previous um quarter's growth was 2.4. So significant um difference there. The the main driver as as you said was um the um pre-tariff import surge, um which we got sort of um detail on that in on data earlier in earlier in the week in trade data. Um And so but what what also was interesting in in if you dig into the into the data was there was solid growth in private domestic spending, which I guess you know you'd expect if there was this this surge in in in imports.
So um, you know, solid private spending but more than offset by the the import tariffs and hence you you had that negative negative growth. And it's the first time we've seen a contraction in US GDP growth since uh two thousand twenty two.
Yeah, question is how long does it last? So there's uh many moving parts, aren't there? We've already discussed some of them. I mean also uh some of those imports included quite a lot of gold as well, uh, which won't have been included in the GDP numbers but will have been included in the in the trade numbers as well.
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Chapters
8 chapters
1
Why did the US GDP contract in Q1 and what role did pre‑tariff import spikes play?
0:01–2:17
2
How are equity markets reacting to the US GDP surprise and what explains the late‑day rebound?
2:17–4:29
3
What does the latest US labor data (ADP, jobless claims, payrolls) indicate about the employment outlook?
4:29–6:40
4
How are global economies (Canada, Europe, China) faring after the US slowdown and what are the key GDP highlights?
6:40–9:00
5
What does Australia’s CPI trim‑mean reveal about inflation pressures and the RBA’s rate‑cut expectations?
9:00–11:10
6
How is the Federal Reserve balancing inflation versus a potential slowdown in its policy decisions?
11:10–13:54
7
What are the bond‑market reactions to the mixed data, Treasury guidance and Fed expectations?
13:54–16:21
8
Why are big‑tech earnings (Microsoft, Meta) outperforming expectations and what does that mean for market sentiment?
16:21–17:44