US economy shrinks, but is it temporary?

Thursday 1st May 2025

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Markets responded to a larger than expected fall in US GDP reported this morning. But, as NAB’s Skye Masters suggests, equity markets clawed their way back in late trade. Perhaps its because the fall was largely driven by short term factors, in particular a much higher than expected level of imports, cars in particular, ahead of the imposition of tariffs. Canada saw a similar impact on their GDP read, whilst the European economy was exempt from such impacts. Yesterday’s Aussie CPI print gives no reason for the RBA to avoid a rate cut this month. They have been overly cautious on their outlook for inflation, says Skye. The focus now switches to US jobs, with non-farm payrolls tomorrow night, the weekly jobless claims tonight, and a weaker than expected growth number in the ADP figures last night. Plus the earnings or Meta and Microsoft.

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