Summary by Bloomberg AI
- First-quarter GDP shrank 0.3% due to a surge in imports, but domestic demand was strong, with final sales to domestic purchasers up 2.3%.
- The ISM Manufacturing PMI was better than expected, but supplier deliveries slowed, prices accelerated, and export orders were down.
- April’s jobs report was strong, with 177k payrolls, a stable unemployment rate, and increased labor-force participation, but the report came too early to capture the full impact of tariffs.
By Eliza Winger (Economist)
05/02/2025 11:12:51 [BI]
(Bloomberg Economics) — First-quarter GDP shrank amid extensive pre-tariff front-loading, but domestic demand kept recession fears at bay. The ISM Manufacturing PMI surprised to the upside, and April payrolls were solid. Still, this jobs print came too early to capture the blow from “Liberation Day” tariffs — we expect to see much weaker readings in coming months.
Here are our main takeaways from the week:
1. Real GDP contracted 0.3% in 1Q (vs. +2.4% prior), with a surge in imports subtracting 5 percentage points from the headline. Final sales to domestic purchasers — or GDP excluding international trade and inventories — exceeded expectations, up 2.3%. However, some of that demand was pulled forward to beat tariffs, leaving less room for growth ahead.
2. April’s ISM Manufacturing PMI surprised to the upside, falling less than expected as trade policy begins to affect US factories. Supplier deliveries slowed, prices accelerated, and export orders were down. We think firms will try to pass along higher input costs to end users, only to see demand retrench.
3. April’s jobs report was strong all around: Payrolls grew solidly (177k vs. 185k prior), the unemployment rate was stable at 4.2%, and labor-force participation increased. However, this report comes too early to capture the full employment hit from President Donald Trump’s tariffs — we expect the May and June reports to be much weaker.