U.S. Economic Data Sparks Stagflation Fears, Pushing Bitcoin and Stocks Lower
What was shaping up to be another positive trading day quickly turned negative as disappointing economic data fueled growing concerns over stagflation.
First, the ADP jobs report for April, released two days ahead of the government’s official employment data, showed that only 62,000 private sector jobs were added in the month—well below the expected 108,000 and March’s 147,000. This marked the weakest job creation figure since July 2024.
Next came the first estimate of U.S. GDP growth for Q1, which showed a decline of 0.3%, contrary to the expected 0.2% growth. The weaker-than-expected GDP result reflects the impact of early imports front-loaded by businesses, anticipating potential tariffs later in the year. In economic terms, rising imports without a corresponding increase in exports typically dampen GDP growth. In fact, the imbalance between imports and exports reduced GDP growth by nearly 5% in Q1. Additionally, government spending, impacted by the Trump administration’s DOGE initiatives, acted as a drag on growth for the first time since 2022.
Inflation data also added to the negative sentiment. The Core PCE price index, a key inflation measure embedded in the GDP report, rose 3.5%, surpassing expectations of a 3.1% increase, further signaling persistent inflationary pressures.
The dismal economic data led to a sharp sell-off in U.S. stocks, with the Nasdaq dropping 2% and the S&P 500 falling 1.5%. Bitcoin (BTC) followed suit, slipping by about 1% to around $94,300, as investors digested the combination of weakening economic indicators and inflation fears.
