Weak Economic Indicators Drive Stagflation Worries, Pulling Bitcoin and Stocks Down
What started as a promising day for markets quickly turned sour after a wave of disappointing economic data triggered fresh concerns about stagflation.
The ADP jobs report for April, released two days ahead of the official government figures, revealed a sharp slowdown in job creation, with only 62,000 private sector jobs added. This fell well short of expectations for 108,000 and marked a significant decline from March’s 147,000. It was the weakest job growth since July 2024, sparking fears of a slowing labor market.
The economic downturn continued with the U.S. government’s first-quarter GDP estimate, which showed a 0.3% contraction, missing the anticipated 0.2% growth. A significant contributor to the negative GDP growth was the surge in imports, as businesses front-loaded goods ahead of expected tariffs. This imbalance between imports and exports shaved nearly 5% off the GDP for the quarter. Additionally, government spending tied to the Trump administration’s DOGE policy was also a drag on growth, marking the first time it had impacted GDP negatively since 2022.
Inflation pressures remained a concern, with the Core PCE price index rising 3.5%, well above the expected 3.1% increase. The combination of rising prices and slowing growth sparked fears of stagflation—where inflation persists despite a stagnating economy.
This troubling economic data led to a broad decline in U.S. stocks, with the Nasdaq falling 2% and the S&P 500 dropping 1.5%. Bitcoin followed suit, slipping by 1% to $94,300, as market sentiment soured amid growing stagflation concerns.
