London Daily

Focus on the big picture.
Friday, Aug 15, 2025

US recession fears grow as economy slows sharply in first quarter

US recession fears grow as economy slows sharply in first quarter

Growth eases by far more than expected between January and March to the extent financial markets and many economists now believe recession is inevitable.

The world's largest economy slowed sharply in the first quarter of the year, according to the first official estimate which has raised fears of recession ahead.

Growth was measured at an annualised rate of 1.1% between January and March, the Commerce Department said.

Economists had been expecting a figure of 2%.

The slump followed growth of 2.6%, by the same measure, during the final three months of 2023.

The growth was mainly explained by consumer spending holding up, probably due to a low unemployment rate, as the aggressive pace of interest rate rises to tame inflation hit other areas, such as the housing market, harder.

The data also pointed to a big reduction in business inventories - behaviour that is typically seen in anticipation of an economic downturn.

Economists are split on the prospect of recession being declared.

The definition of a technical recession across most of the world is two consecutive quarters of negative growth.

The Federal Reserve has raised its main interest rate to a range of 4.75%-5% and is expected to hike again next month


By that measure, the US economy would have been in recession during the first half of last year.

But the country defines such a contraction differently. It is determined by a committee of experts.

The US economy's low jobless rate largely prevented a recession being declared last year but conditions are darkening for 2023.

Many economists say the cumulative impact of the Fed Reserve's rate hikes has yet to be fully felt while the pace of hiring is slowing.

Many banks, which are charging higher interest rates as a result, have also muddied the waters due to a tightening of lending standards since the failure last month of two major banks - Silicon Valley Bank and Signature Bank.

There are signs the crisis of confidence is not over yet as First Republic, a major regional lender, has seen a fresh run on its share price this week taking it to fresh lows.

It was effectively rescued last month by a $30bn cash injection from 11 major peers and revealed on Tuesday that $100bn had been withdrawn by depositors during the frenzy to grip the sector.

It has been reported that the federal government is unwilling to engineer a rescue.

Another political challenge is also gaining traction.

The Republican-dominated House of Representatives has moved to pressure President Biden over a looming debt ceiling deadline by voting to raise the limit only in exchange for big spending cuts.

A default would plunge the US economy into chaos so it forces Mr Biden to negotiate with his political opponents.

Brian Klimke, investment director at Cetera Investment Management, said of the economic growth figures: "January was really the standout month and since then we've seen weakness in February and March, which has really been slowly dragging down the economy.

"If we're looking to the future, data does seem to be continuing to weaken.

"The good news is we do think a recession could be mild."

Newsletter

Related Articles

0:00
0:00
Close
Man Who Threw Sandwich at Federal Agents in Washington Charged with Assault – Identified as Justice Department Employee
A Computer That Listens, Sees, and Acts: What to Expect from Windows 12
Iranian Protection Offers Chinese Vehicle Shipments a Cost Advantage over Japanese and Korean Makers
UK has added India to a list of countries whose nationals, convicted of crimes, will face immediate deportation without the option to appeal from within the UK
Southwest Airlines Apologizes After 'Accidentally Forgetting' Two Blind Passengers at New Orleans Airport and Faces Criticism Over Poor Service for Passengers with Disabilities
Russian Forces Advance on Donetsk Front, Cutting Key Supply Routes Near Pokrovsk
It’s Not the Algorithm: New Study Claims Social Networks Are Fundamentally Broken
Sixty-Year-Old Claims: “My Biological Age Is Twenty-One.” Want the Same? Remember the Name Spermidine
Saudi Arabia accelerates renewables to curb domestic oil use
U.S. Investigation Reports No Russian Interference in Romanian Election First Round
Oasis Reunion Tour Linked to Temporary Rise in UK Inflation
Musk Alleges Apple Favors OpenAI in App Store Rankings
Denmark Revives EU ‘Chat Control’ Proposal for Encrypted Message Scanning
US Teen Pilot Reaches Deal to Leave Chile After Unauthorized Antarctic Landing
Trump considers lawsuit against Powell over Fed renovation costs
Trump Criticizes Goldman Sachs Over Tariff Cost Forecasts
Perplexity makes unsolicited $34.5 billion all-cash offer for Google’s Chrome browser
Kodak warns of liquidity crisis as debt obligations loom
Cristiano Ronaldo and Georgina Rodríguez announce engagement
Taylor Swift announces 12th studio album on Travis Kelce’s podcast after high-profile year together
South Korean court orders arrest of former First Lady Kim Keon Hee on bribery and corruption allegations
Asia-Pacific dominates world’s busiest flight routes, with South Korea’s Jeju–Seoul corridor leading global rankings
Private Welsh island with 19th-century fort listed for sale at over £3 million
JD Vance to meet Tory MP Robert Jenrick and Reform’s Nigel Farage on UK visit
Trump and Putin Meeting: Focus on Listening and Communication
Instagram Released a New Feature – and Sent Users Into a Panic
China Accuses: Nvidia Chips Are U.S. Espionage Tools
Mercedes’ CEO Is Killing Germany’s Auto Legacy
Trump Proposes Land Concessions to End Ukraine War
New Road Safety Measures Proposed in the UK: Focus on Eye Tests and Stricter Drink-Driving Limits
Viktor Orbán Criticizes EU's Financial Support for Ukraine Amid Economic Concerns
South Korea's Military Shrinks by 20% Amid Declining Birthrate
US Postal Service Targets Unregulated Vape Distributors in Crackdown
Duluth International Airport Running on Tech Older Than Your Grandmother's Vinyl Player
RFK Jr. Announces HHS Investigation into Big Pharma Incentives to Doctors
Australia to Recognize the State of Palestine at UN Assembly
The Collapse of the Programmer Dream: AI Experts Now the Real High-Earners
Security flaws in a carmaker’s web portal let one hacker remotely unlock cars from anywhere
Street justice isn’t pretty but how else do you deal with this kind of insanity? Sometimes someone needs to standup and say something
Armenia and Azerbaijan sign U.S.-brokered accord at White House outlining transit link via southern Armenia
Barcelona Resolves Captaincy Issue with Marc-André ter Stegen
US Justice Department Seeks Release of Epstein and Maxwell Grand Jury Exhibits Amid Legal and Victim Challenges
Trump Urges Intel CEO Lip-Bu Tan to Resign Over Alleged Chinese Business Ties
Scotland’s First Minister Meets Trump Amid Visit Highlighting Whisky Tariffs, Gaza Crisis and Heritage Links
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
×