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Economic slowdown in the U.S.: stagflation or recession ahead?
The sluggish start to 2025 for U.S. economic data continues, with the ISM Manufacturing Index signaling renewed weakness. In February, the index declined to 50.3, down from 50.9 in January, missing the consensus forecast of 50.7. Meanwhile, construction spending contracted by 0.2% month-over-month in January, a steeper decline than the expected 0.1% drop.
More concerning are the sharp declines in key ISM Manufacturing index components, with both new orders and employment slipping into contraction territory. New orders fell significantly from 55.1 to 48.6, while employment dropped from 50.3 to 47.6. Production remains in expansion but only marginally, at 50.7, compared to January’s 52.5. Surprisingly, imports showed moderate growth at 52.6, while the prices paid component of the survey rose alarmingly to 62.5, well above expectations. This data raises concerns about a growing risk of stagflation, where weak economic growth coincides with persistent inflationary pressures, increasing the risk of a U.S. recession.
Job growth of 151k fell slightly short of expectations, with minor downward revisions to the previous month. Unemployment rose to 4.1% despite lower participation, and prior strong wage gains were revised down. This supports the case for the Fed to resume rate cuts. With the combination of federal layoffs, public spending cuts, and tariff-related uncertainty fostering a weaker economy.
A U.S. Bitcoin Strategic Reserve and a crypto stockpile
The crypto community shouldn't be discouraged by the lack of further Bitcoin purchases, as the establishment of the US Bitcoin Strategic Reserve is a significant step forward in legitimising the asset. Notably, no other tokens were mentioned in the executive order, and its announcement came ahead of today's White House Crypto Summit. This suggests that the Trump administration is distinguishing Bitcoin from other tokens previously discussed on TruthSocial.
From a long-term perspective, combined with a more relaxed regulatory environment, these developments are a game changer. In just a year, digital assets have transitioned from a fringe asset class to being properly regulated, with ETFs launched, institutions investing, and now governments considering them for their strategic reserves. We didn’t expect things to progress this quickly, but from our standpoint, it makes complete sense.
In some respects, this move by the US government is even more significant than the ETF launch, as it enhances the asset class's credibility and is likely to encourage institutional funds (recent report here on institutional holdings) that have hesitated to invest due to concerns over legitimacy.
