World Market Insights – Week 18, 2025: GDP Stumbles, PCE Steals the Spotlight
May 04, 2025•5 min read
☕ Welcome to your Sunday Market Update
Welcome back to your weekly market digest, where we turn economic drama into something you can read before your tea goes tepid. If last week tariffs and trade war was centre stage at the theatre, this week brought a new few new characters to the fore: a surprise US GDP stumble, a PCE inflation plot twist, and China doing its best impression of a poker player with a very large stack.
Quick Recap: Tariffs, Tensions, and “Wait and See”
If you remember last week’s “Great Tariff Tango” and Powell’s central bank theatrics, you’ll know we left off with markets in classic “wait and see” mode.
Week 17 ended with markets wondering with no clear direction upwards or downwards. With week 18 to be a choppy start, with mixed outcomes for week 18.
Week 18, 2025: GDP Stumbles, or… sputters?
Well, the curtain rose on Week 18 with a new act: the US economy tripped over its own shoelaces, inflation made a cameo, and the US–China trade drama continued its run—albeit with a few new plot twists.
Just as markets were hoping for a smoother ride, the US GDP numbers for Q1 2025 landed with a thud: a 0.3% contraction, surprising many who expected continued growth.
The main culprit? Imports surged (which, in GDP math, is a negative — see the references section below), and government spending took a breather.
Not a surprise considering the uncertainty of tariffs driving stockpiling and the government DOGE reducing government expenditure.
So, is there a recession coming? Not necessarily so…
Figure 2 https://www.bea.gov/sites/default/files/2025-04/gdp1q25-adv.pdf
Underneath the headline, though, private domestic demand remained strong, with real final sales to private domestic purchasers up 3.0%. So, while the top-line number looked grim on the international side, the domestic economic engine isn’t sputtering just yet…
Markets will be watching however — with ‘earnings season’ commencing over the next few weeks, we can expect significant volatility.
In Summary:
- Immediate reaction: Stock prices dropped on the GDP news as markets digested the surprise contraction and its implications.
- Subsequent rebound: Markets recovered as investors recognized the contraction was driven by a temporary import surge, not a collapse in core economic activity, and anticipated potential policy responses or a reversal of the one-off effects.
- Ongoing caution: Despite the rebound, analysts warned of continued volatility and the risk of further slowdown if tariffs persist, and consumer/business confidence weakens.
And this week (Week 18) PCE is rising
But the real scene-stealer this week was the PCE Price Index — the Federal Reserve’s preferred measure of inflation. The quarterly PCE jumped to 3.6%, up from 2.4% last quarter, and the “core” PCE (excluding food and energy) clocked in at 3.5%.
The Personal Consumption Expenditures (PCE) Price Index is the inflation gauge the Fed relies on most when setting interest rates and making monetary policy decisions. And 3.6% might be a little too spicy for the Fed’s taste.
Interestingly, the latest monthly PCE data for March showed a bit of cooling, with prices up 2.3% year-on-year — the lowest in five months, but still above the Fed’s 2% comfort zone. The result?
So what will the FED do, will they reduce interest rates and facilitate money flow into risk assets?
Well the 3.6% has sparked renewed debate about when — or if — rate cuts might come…
Interest rates won’t be dropping at the next FED meeting, but all analysts and markets will be hanging off Powell’s words to see if they can glean what he intends to do.
SUMMARY of the WEEK:
Two economic indicators came out this week. So with their results, will interest rates drop and money flow into risk assets?
Well after these results, interest rates won’t be dropping in May!
So it is not what Powell will do at the May meeting but what he says which will move the market.
US–China: Still Circling, Not Quite Dancing
On the trade front, the US and China are still circling each other. The US reached out about starting tariff talks, and China’s Ministry of Commerce said the “door is open” — but only if the US is serious about negotiations.
Meanwhile, US officials claim China is feeling the pinch and wants a deal, but both sides are still playing hard to get.
Markets are cautiously optimistic, but as one strategist quipped, “uncertainty isn’t about a singular event but rather its length.”
Translation: keep your crash helmet handy.
Markets: Mixed Signals, Eyes on the Data
Despite the GDP stumble, equity markets held up, with the S&P 500 and Dow ending higher. Gold rebounded as investors hedged their bets.
Corporate earnings have been mostly positive, but sticky inflation, softening growth, and ongoing trade uncertainty mean investors are still watching the data like hawks.
Looking Ahead:
- US Jobs Data: Non-Farm Payrolls and unemployment figures are due, with forecasts pointing to a slowdown in hiring.
- Central Banks: The Fed, Bank of Japan, and others will be watched for any hint of policy shifts.
- Earnings Season: Big names like Apple, Microsoft, Amazon, and Meta are reporting — expect fireworks, or at least a few sparklers.
🧠 Ed’s Final Word
This week’s story? The US economy is wobbling but not collapsing, inflation is still lurking, and the trade war is more soap opera than Shakespeare. The market mood: cautious optimism, but with a healthy respect for plot twists.
As always, these are the thoughts and opinions of Ed le Feuvre and no one else’s — not even Beaufort Private Equity Limited. Please do your own research before making investment decisions.
📚 Further Reading:
- US GDP, Q1 2025 – BEA
- China says it is ‘evaluating’ Trump administration’s outreach on tariffs – Al Jazeera
- US PCE Price Index Annual Change – Trading Economics
- How Do Imports Affect GDP? – St. Louis Fed
- Personal Consumption Expenditures (PCE) – Investopedia
Written by Ed le Feuvre, Partner at Beaufort Private Equity
🔗 Connect with Ed on LinkedIn
🌐 www.beaufortprivateequity.com
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– Practicing Chartered Accountant; experienced (25+ years) finance professional for regulated financial services organisations – Director and co-owner of Gibraltar FSC regulated Company & Trust Management Company – Strong financial modelling and financial planning and analysis for FTSE listed financial conglomerate – Treasurer (£1BN of AUM and £250M of regulatory capital) for regulated financial services organisation – Board experienced (both Group and subsidiary) along with leadership chairing committees – Experienced at running large multi located departments and teams – Corporate Finance experience in both technology, private equity and banking M&A – International audit experience UK GAAP, US GAAP, IFRS and Gibraltar GAAP – Strong managerial finance, financial accounting and financial internal control including Sarbanes Oxley audits – ERP implementation experience in Oracle and NetSuite and online accounting systems – Big 4 ACA qualification with treasury, finance, corporate finance and consultancy experience – Cambridge university education
