“It takes 20 years to build a reputation and five minutes to ruin it.” — Buffetts

1. U.S. Economy Contracts at 0.3% Rate in First Quarter — the Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—fell at a seasonally and inflation adjusted 0.3% annual rate in the first quarter. That was the steepest decline since the first quarter of 2022. Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter. The GDP report is the first major economic scorecard for the January-to-March quarter, a period in which the White House changed hands from President Joe Biden to President Trump. January—most of which was before Trump took office—was hit by wildfires in Los Angeles and disruptive winter storms in many parts of the country.
2. US Manufacturing Activity Shrinks by the Most Since November — The Institute for Supply Management’s factory gauge eased 0.3 point to 48.7, data out Thursday showed. The group’s production index stumbled more than 4 points to 44. Readings below 50 indicate contraction. Prices paid for inputs, however, accelerated slightly. The figures illustrate an industrial sector struggling for traction as US tariffs and general uncertainty surrounding trade policy interrupt expansion plans. Orders shrank for a third month and backlogs retreated at a faster pace, consistent with subdued demand.
3. US Consumer Spending Jumps While Key Inflation Gauge Slows Down — Inflation-adjusted consumer spending climbed 0.7% last month, according to Bureau of Economic Analysis data out Wednesday. That was the most since the start of 2023 and suggested households spent aggressively to get ahead of new tariffs.
Meantime, the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures price index — stagnated from a month earlier for the first time in nearly a year. Excluding food and energy, the so-called core PCE was also unchanged, the tamest in almost five years. The data round out a quarter in which the US economy contracted for the first time since 2022 on a monumental pre-tariffs import surge and more moderate consumer spending. The report earlier Wednesday also showed core PCE inflation accelerated to a 3.5% pace in the first quarter — the most in a year.
4. U.S. payroll growth totals 177,000 in April, defying expectations — Nonfarm payrolls increased a seasonally adjusted 177,000 for the month, slightly below the downwardly revised 185,000 in March but above the Dow Jones estimate for 133,000, the Bureau of Labor Statistics reported Friday. The unemployment rate held at 4.2%, as expected, indicating that the labor market is holding relatively stable. The survey of households, which is used to calculate the jobless rate, showed an even stronger gain, with an increase of 436,000 in those who reported holding jobs on the month.
A broader unemployment gauge that includes discouraged workers and those holding part-time jobs for economic reasons, or the underemployed, edged lower to 7.8%. The labor force participation rate ticked higher to 62.6%. The strong report led traders to push out expectations for an interest rate cut until July, according to the CME Group’s FedWatch gauge of futures pricing.

The week ahead — Economic data from Econoday.com:

“Do more of what works and less of what doesn’t” — Unknown

1. Trump U-Turns on Powell, China Follow Dire Economic Warnings — Trump entered office with a steadfast desire to reshape the global economy. But his resolve has appeared to waver in the face of turmoil in equities and bonds and pleas from powerful executives who fear his sweeping tariffs and interference with the Federal Reserve could set off an economic calamity. Trump on Tuesday said he had no intention to fire Powell — despite days of criticism over the central bank’s policies — and said he believed a deal with Beijing would significantly reduce the sweeping tariffs he’s posted on Chinese goods. After a report that the US would be willing to phase in lighter tariffs on Beijing over five years on Wednesday, Trump told reporters that China was “going to do fine” once talks had settled.
2. March home sales drop to their slowest pace since 2009 — Sales of previously owned homes in March fell 5.9% from February to 4.02 million units on a seasonally adjusted annualized basis, according to the National Association of Realtors. That’s the slowest March sales pace since 2009. Sales were 2.4% lower than March 2024 and slumped across all regions month-to-month. They fell hardest in the West, the priciest region of the country, down more than 9%. The West, however, was the only region to see a year-over-year gain, due to strong activity in the Rocky Mountain states where job growth is strong.
3. Economy Orders for big-ticket items like autos and appliances surged 9.2% in March in rush to beat tariffs — So-called durable goods orders soared a seasonally adjusted 9.2% on the month, up from a 0.9% gain in February and well ahead of the Dow Jones forecast for a 1.6% increase. Excluding defense, the increase was even higher, at 10.4%, though the ex-transportation number was flat. Transportation equipment orders surged 27%, led by a 139% increase in nondefense aircraft and parts. In addition to aircraft and autos, the durables category also includes items such as appliances, computers and jewelry. On the durables goods side, the advanced report reflects a pull-forward effect as Trump dangled threats against U.S. trading partners through March before announcing his “Liberation Day” duties on April 2. Trump slapped a 10% tariff against all imports as well as a select charges against dozens of countries that he ultimately tabled for 90 days for negotiations.
4. US Consumer Sentiment Slides While Inflation Expectations Jump — The final April sentiment index fell to 52.2 from 57 a month earlier, according to the University of Michigan. While a slight improvement from the preliminary gauge of 50.8, the latest figure is the fourth-lowest in data back to the late 1970s.
Consumers anticipated inflation will rise at an annual rate of 4.4% over the next five to 10 years, the data out Friday showed. They expect prices to rise at a 6.5% pace over the next year. While down from a preliminary reading of 6.7%, year-ahead price expectations are still the highest since 1981.

The week ahead — Economic data from Econoday.com:

“Set your own rules and stick to them; never argue with the market; never make a play you can’t afford; never give way to irrational exuberance. Above all, don’t be a sucker.” — Jesse Livermore

1. China Goes After Boeing, Tells Airlines Not to Order New Aircraft From U.S. Jet Maker — Beijing has told Chinese airlines not to place new orders for Boeing jets and is requiring carriers to seek approval before taking delivery of aircraft they have already ordered, according to people with knowledge of the Chinese regulator’s guidance. Cutting off deliveries to China could dent revenue for the cash-strapped jet maker, which has been working to clear out parked planes and ramp up production and deliveries amid a quality crisis. Longer-term, the Chinese market is crucial; Boeing has forecast it will account for a fifth of the world’s airplane deliveries in the next two decades. Of 130 airplanes Boeing delivered globally this year through March, 18 went to Chinese airlines. Boeing delivered two planes to Chinese airlines earlier this month, according to data from Cirium.
2. March Retail Sales Beat. Consumers Are Stocking Up Ahead of Tariffs — Retail sales gained 1.4% in March from February, better than economists’ forecasts for a 1.3% increase, the Census Bureau reported. “Auto makers, by way of incentives, and savvy consumers are likely attempting to get ahead of future uncertainty surrounding auto pricing levels by taking advantage of March deals,” said Chris Hopson, principal analyst at S&P Global Mobility, in a news release at the end of March. That said, spending among other categories was strong, as well. Stripping out sales of autos and gasoline, retail sales notched a monthly gain of 0.8%, higher than projections for a 0.5% increase.
3. US Mortgage Rates Jump Most Since October, Denting Home Demand — the contract rate on a 30-year mortgage increased 20 basis points in the week ended April 11 to 6.81%, the highest since February, according to Mortgage Bankers Association data released Wednesday. Rates on adjustable and 15-year fixed mortgages also climbed. The jump in financing costs brought an abrupt end to a six-week stretch of increasing home-purchase applications, highlighting home-buyer sensitivity to interest rates as housing prices remain elevated. MBA’s purchase applications index dropped 4.9%. The refinancing gauge slumped more than 12%, the fourth decline in the last five weeks. Mortgage rates track yields on 10-year Treasuries, which soared last week by a half percentage point as the trade war shakes global markets. The weekly surge in yields was the largest in more than two decades, raising fears the US is losing its status as the world’s safe haven. Yields have gradually retreated so far this week.
4. Trump Lashes Out at Powell, Says ‘Termination Cannot Come Fast Enough’ — late last week, in the Oval Office, Trump told reporters he had the power to dismiss Powell as Fed chair—a position that is at odds with Powell’s view of the law. Trump is upset that the Fed isn’t lowering interest rates to cushion the fallout from his trade war. Powell is “too late. He’s always too late, little slow,” Trump said. Inflation in the U.S. could rise more than in other countries in the coming months because Trump has imposed a range of tariffs. Whether the Fed chair can be removed before the end of a four-year term is an open question because it has never been attempted. Trump is trying to dismiss several other Biden appointees who have challenged their removal by citing a 90-year legal precedent that has shielded them from dismissal over a policy dispute.

The week ahead — Economic data from Econoday.com:

“keep your head while others are losing theirs” Rudyard Kipling

1. Trump: 10% Tariffs Across the Board. ‘Worst’ Trade Partners Will Pay More — Trump presented a large chart listing the specific tariff levels for certain countries, which can be seen below. These include a 34% tariff on goods from China, 46% on those from Vietnam, and 32% on those from Taiwan. Cambodia has the highest tariff rate of any country at 49%. Goods from the European Union will be levied at a 20% rate. “You know, you think of European Union, very friendly. They rip us off. It’s so sad to see. It’s so pathetic,” he said.

2. US Services Index Falters as Employment Shrinks Most Since 2023 — The Institute for Supply Management’s gauge of services dropped to 50.8 from 53.5 a month earlier, according to data released Thursday. The figure was weaker than all but one estimate in a Bloomberg survey of economists. Readings above 50 signal growth. A month earlier, the employment index advanced to the highest level since the end of 2021. A Wednesday report showed private-sector hiring accelerated in March by more than projected in a fairly broad advance.
A sustained trend of weaker employment readings may raise concerns of a broader slowdown in a labor market that has been the economy’s bedrock. Meanwhile, the ISM prices-paid index eased slightly to a still-elevated 60.9 in March.
3. Trump Pauses ‘Reciprocal’ Tariffs, but Hits China Harder — Trump said Wednesday that his 10%, baseline tariff on virtually all imports would stay in effect. But he implemented a 90-day pause for the higher, so-called reciprocal rates he had announced a week earlier on nations the administration views as “bad actors” on trade—except for China. In an early afternoon social-media post, Trump wrote that he had raised the tariff imposed on China to 125%, “effective immediately.” An administration official said that Canada and Mexico would remain exempt, for now, from the 10% baseline global tariff. While America’s neighbors remain subject to plans to impose 25% tariffs on most imports to the U.S. for what Trump says is their role in fueling the fentanyl crisis, an exemption is still in place for these levies on autos and many other goods compliant with the U.S.-Mexico-Canada trade agreement.
4. Consumer Sentiment Sinks, Approaching Three-year Low with Inflation Worries Highest Since 1981 — The University of Michigan’s gauge of consumer sentiment fell to 50.8% in a preliminary April reading from 57.0% in the prior month. It is the lowest level since June 2022. Sentiment has dropped for four straight months and is down 30% from December. Federal Reserve economists believe that if consumers expect high inflation, it will be easier for firms to raise prices, leading to higher price pressure.

The week ahead — Economic data from Econoday.com:

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