(Bloomberg) — After cruising along comfortably for most of last year, the world’s largest economy lost altitude at the start of 2025 as consumers tired and the trade deficit ballooned on a tariff-related scramble for imports.
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The US government’s initial estimate of first-quarter gross domestic product is projected to show the economy expanded at a 0.4% annualized rate, the weakest in nearly three years. With financial markets hypersensitive to the economy’s prospects, near-stagnant GDP would risk elevating concerns about a potential recession and any unraveling of the job market.
So far, though, the hiring pace has cooled just a bit, and there are no signs of widespread layoffs. On Friday, the closely watched monthly employment report is forecast to show a 130,000 increase in payrolls — about 100,000 less than the larger-than-expected March gain. The jobless rate is projected to hold at 4.2%.
GDP data on Wednesday will be an appraisal of the economy in the early period of Donald Trump’s presidency, showing the initial impact of his tariffs and trade-policy messaging in the lead-up to more sweeping duties that were announced April 2.
Business investment in equipment — largely, commercial aircraft — may be a bright spot in the GDP report. However, companies have since become increasingly guarded about spending as they await more clarity on tariffs, trade deals and tax policy.
“We estimate real GDP decelerated sharply in the first quarter to 0.4%, from 2.4% in the final quarter of 2024. The trade deficit is set to be the largest drag, as businesses front-loaded goods imports ahead of the Trump administration’s tariff surge. Consumers also rushed to buy goods that are likely to face higher prices from the tariffs, such as cars, though they otherwise remained cautious.”
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists.
The latest Bloomberg monthly survey of economists shows GDP will expand by less than 1% in each of first three quarters of this year, with private investment retrenching. Consumers, many of whom have grown concerned about job security, are also seen limiting their purchases.
Another key report in the coming week is a monthly reading on personal consumption and income at the end of the first quarter. Economists forecast a healthy increase in March spending along with cooler income growth. Wednesday’s report is also seen showing a welcome slowdown in the Federal Reserve’s preferred inflation gauge.
The personal consumption expenditures price index, minus food and fuel, is forecast to have risen 2.6% from a year ago, which would be the smallest annual gain since June. The figure surfaces about a week before the Fed’s May meeting, at which economists expect no change in interest rates. Policymakers observe a traditional blackout period in the week preceding each gathering.
Elsewhere, Chinese purchasing manager indexes, economic output and inflation data across Europe, and the election in Canada will be in focus. Central banks in Japan, Hungary, Chile and Colombia are expected to leave rates unchanged, while Thai policymakers may cut.
Canadians vote Monday in a consequential election to determine who’ll lead them through a fractious trade war with the US. Trump’s economic and sovereignty threats have shaken Canadians, who polls suggest are leaning toward Mark Carney’s Liberals over Pierre Poilievre’s Conservatives. Both leaders have promised swift trade negotiations with Trump as well as deficit spending to strengthen Canada’s economy and military.
GDP data by industry for February and a flash estimate for March will offer insight into Canada’s first-quarter economic performance.
Exporters rushing to get ahead of Trump’s tariffs were a source of strength early in the year, but the trade war has weighed heavily on business and consumer confidence, restraining investment and spending. The Bank of Canada expects about 1.8% annualized growth in real GDP in the first quarter.
The central bank will release a summary of the deliberations that led to its decision earlier this month to hold rates steady and to avoid giving concrete economic projections due to the unpredictability of US trade policy. The summary may give insight into the conditions that would spur the Bank of Canada to resume its easing cycle, given that the outlook for Canadian growth is increasingly weak.
China releases figures that may be somewhat distorted by Trump’s tariff campaign. The week kicks off on Sunday with data that are expected to show industrial profits rising from a year ago in March; industrial output beat expectations that month due to front-loaded demand.
Both the official and Caixin manufacturing PMI gauges for April are due on Wednesday, with readings likely to sag from trade tensions as well as settling back from a seasonal bump in March.
Bloomberg Economics estimates that tariffs at current levels may reduce China’s direct US exports by more than 80% over the medium term, putting as much as 2.3% of GDP at risk, adding to pressure on policymakers to implement stimulus measures.
The region also gets several price growth updates. Australia’s consumer inflation on Wednesday is seen having cooled a bit in the first quarter, to 2.3% year on year, pushing up real interest rates and pressuring the RBA to cut its benchmark interest rate when it next sets policy on May 20.
South Korea’s CPI may back the case for a rate cut after recent grim GDP data. Indonesia, Pakistan and Uzbekistan also publish CPI statistics.
Taiwan reports first-quarter GDP on Wednesday, and trade figures are due during the week from Sri Lanka, Thailand, South Korea, Australia, Hong Kong and the Philippines.
On the policy front, the Bank of Japan is widely expected to hold its key rate steady on Thursday as authorities assess the likely impact from tariffs. Economists surveyed by Bloomberg have pushed back their expectations for rate hikes, with most seeing the possibility the BOJ may have to stay on hold for the rest of 2025. The second round of US-Japan trade talks, expected mid-week, may shed light on the tariff front.
A day earlier, the Bank of Thailand is expected to lower borrowing costs by a quarter point. The central bank has cut its policy rate by 50 basis points since October as the growth outlook for Southeast Asia’s second largest economy dims and domestic financial conditions tighten.
Euro-area GDP and inflation numbers will be in focus, with data due Friday set to show that the European Central Bank’s task of restoring 2% inflation is almost complete.
Consumer-price growth probably slowed to 2.1% this month, while an underlying measure that strips out volatile elements such as energy is predicted to have ticked up to 2.5%.
ECB policymakers have struck an optimistic tone on inflation of late, with the French central-bank chief Francois Villeroy de Galhau concluding that there “is currently no inflationary risk in Europe.”
Numbers from his country, due on Wednesday, support that statement, with economists predicting a slowdown to just 0.7%. Meanwhile, German and Italian readings will stay above 2%.
GDP data the same day will show the state of the economy before Trump’s April 2 tariff announcement. France’s output probably grew just 0.1%, while Germany, Italy and the wider euro area each expanded 0.2%. Economic growth and GDP indicator numbers are also due across Europe, including from Ireland, Sweden and Poland.
Earlier in the week, ECB Vice President Luis de Guindos and Governing Council members Olli Rehn, Robert Holzmann and Madis Muller are scheduled to make appearances, and the Frankfurt-based central bank publishes its monthly survey of consumers’ inflation expectations.
Elsewhere in the region, UK mortgage and house price numbers are due, with Bloomberg Economics predicting the country’s housing market will enter a soft patch.
Further south, Kenya’s central bank expects annual inflation to quicken to 4.2% from 3.6% in March on the back of tight supplies of vegetables and cornmeal, the nation’s staple.
In a busy week, Brazil posts the central bank’s weekly survey of economists, government debt totals, current account, foreign direct investment, nominal and primary budget balance data, along with its broadest measure of inflation.
The IGP-M general prices index has risen for 12 straight months and is nearing a three-year high, as are wholesale prices. In that time, the benchmark inflation index is up almost 180 basis points to be well above the central bank’s inflation target of 3%, plus or minus 1.5 percentage point.
Chile reports seven economic indicators including March GDP-proxy data, all of which will take a back seat to the central bank’s Tuesday monetary policy meeting.
Policymakers led by Rosanna Costa will likely keep their key rate unchanged for a third straight time as inflation runs above target, growth and demand have surprised on the upside, and Trump’s tariffs cloud the global economic outlook.
Surprising growth and resilient inflation are front and center for Colombia’s central bank at its meeting on Wednesday. That mix sees the early consensus of analysts forecasting that Banrep will again hold at 9.5%.
A light week in Argentina offers up February wages data, while Peru has only its Lima consumer prices report. Inflation in the country’s megacity capital likely moved up for the first month in five, from March’s 1.28%.
Mexico on Wednesday posts its flash first-quarter output report, which may show that Latin America’s No. 2 economy narrowly avoided falling into recession in the three months through March.
—With assistance from Alessandra Migliaccio, Brian Fowler, Mark Evans, Monique Vanek, Laura Dhillon Kane, Piotr Skolimowski and Robert Jameson.
