U.S. Economy Contracts Sharply in Q1 2025: Key Factors and Implications
The U.S. economy contracted at an annualized rate of 0.5 percent in the first quarter of 2025, according to the third estimate (BEA).
Stocks tumbled on Monday, with the Dow Jones Industrial Average heading for its worst day in nearly two years, driven by concerns over the U.S. economy's health and sparking a global sell-off.
Chicago Federal Reserve Bank Building. Photo by Deactivated Account on Unsplash.
The Dow dropped 1000 points, the Nasdaq Composite lost 3.2%, and the S&P 500 slid 2.7%. Earlier, the Dow had fallen as much as 1,200 points.
Fears of a U.S. recession following Friday’s disappointing July jobs report fueled the market meltdown. Investors are worried that the Federal Reserve is not cutting interest rates quickly enough to combat the economic slowdown, opting instead to maintain the highest rates in two decades. This led to a sell-off.
In Asia, Japan’s Nikkei confirmed a bear market with a 12.4% loss, its worst day since the 1987 "Black Monday" crash, closing at 31,458.42. The index lost 4,451.28 points, the largest single-day point drop in its history.
Other global markets also suffered where Bitcoin dropped from nearly $62,000 on Friday to around $52,000 on Monday. and the Cboe Volatility Index surged to 46, peaking at 65, its highest since early 2020.
Talk of unwinding the yen “carry trade” added to the decline after the Bank of Japan raised interest rates, boosting the yen's value and reducing the interest rate differential with the U.S.
