The U.S. economy experienced a surprising contraction of 0.5% during the first quarter of 2024, primarily due to disruptions from trade wars started by President Trump. The slowdown in GDP, a reversal from a 2.4% growth in the previous quarter, resulted from a surge in imports as consumers and businesses sought to purchase goods before potential tariff implementation. Consumer spending significantly slowed, prompting concerns over economic stability as confidence waned and expectations fell below recession thresholds. Former Fed economist Claudia Sahm highlighted the concerning implications of revised consumer spending estimates.
The January-March drop in gross domestic product marked the first contraction in three years, driven by a surge in imports and plummeting consumer confidence.
The downward revision to consumer spending is a potential red flag, indicating future economic troubles as consumer confidence reaches its lowest levels since the COVID-19 pandemic.
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