Making Sense Of The Recent Contraction In Real GDP

2025-05-07 14:50:00 ET

Summary

• According to the U.S. Bureau of Economic Analysis, real GDP decreased at an annual rate of 0.3% in the first quarter of 2025.
• The BEA said the drop in GDP was only partially offset by increases in consumer spending, private investment, and exports, though these weren’t strong enough to fully counter the drags.
• The most alarming detail that may catch the Fed’s attention was the pickup in inflation.
• The combination of falling GDP and sticky inflation isn’t great news for small cap investors. This segment of the market is already more economically sensitive than large caps.

Wednesday, April 30th, brought strong earnings from two of the Magnificent Seven, Microsoft ( MSFT ) and Meta Platforms ( META ) with both companies beating expectations on revenue and earnings per share....

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