FT News Briefing Honey, I shrunk the economy
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May 1, 2025 Microsoft's earnings surprise analysts as demand for cloud services booms. Meanwhile, the U.S. economy shows signs of contraction, raising questions about the impact of tariffs. Spain grapples with a massive power outage, affecting daily life and sparking investigations into its causes amid rising renewable energy usage. As England prepares for local elections, the Conservatives brace for potential losses in a competitive political landscape. Tune in for insights on economics, energy, and the shifting tides of political power!
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Tariffs Caused US GDP Contraction
- The US GDP contraction in Q1 was mainly due to businesses stockpiling imports ahead of anticipated tariffs.
- Domestic consumption and investment remained resilient despite overall economic shrinkage.
Q2 May Reverse Q1 GDP Effects
- Import volumes are expected to drop significantly in Q2 after stockpiling in Q1.
- Consumers may start buying off these stockpiles, potentially lifting GDP in the next quarter.
Fed Unlikely To React To Q1 GDP
- The Q1 GDP contraction is unlikely to affect the Federal Reserve's interest rate decisions immediately.
- The Fed focuses more on inflation data and expectations than on noisy Q1 figures.