U.S. Economy Contracts as Inflation Surprises, Markets Slide Amid Stagflation Fears
What began as a quiet session quickly turned turbulent Tuesday after a double whammy of weak growth and hotter-than-expected inflation reignited concerns about a stagflationary environment.
According to the latest ADP report, U.S. private payrolls rose by just 62,000 in April—less than half the expected gain—marking the slowest month of job creation since mid-2024.
Minutes later, the Commerce Department reported that first-quarter GDP shrank by 0.3%, missing projections for modest growth. A surge in imports—likely driven by companies front-running anticipated tariffs—heavily weighed on overall output, while government spending fell for the first time in over two years.
Adding fuel to the fire, the core PCE index rose 3.5%, outpacing forecasts of 3.1% and underscoring persistent inflationary pressure.
The reaction was swift. The Nasdaq dropped 2%, the S&P 500 shed 1.5%, and Bitcoin fell roughly 1% to $94,300 as investors digested the bleak outlook.
The disappointing data raised fresh doubts about the Federal Reserve’s next steps, with some market watchers warning that rate cuts alone may not be enough to counter deeper structural imbalances.
