U.S. Economy Contracts Faster in Q1
WASHINGTON (Reuters) – The U.S. economy contracted more than previously thought in the first quarter due to weak consumer spending and impacts from tariffs.
The Bureau of Economic Analysis (BEA) reported a downward revision of the gross domestic product (GDP), which decreased at an annualized rate of 0.5% last quarter, revised from an earlier estimate of a 0.2% decline. This revision was largely due to a significant downgrade in consumer spending, now estimated to have risen at only a 0.5% pace, down from 1.2%.
In contrast, the economy grew at a rate of 2.4% during the fourth quarter. The domestic demand growth was also revised down to 1.9% from a previous estimate of 2.5%.
A surge in imports occurred as businesses rushed to acquire goods before President Trump’s tariffs were implemented, significantly affecting GDP. Consumer spending additionally slowed as the positive effects of preemptive purchases, particularly of vehicles, diminished.
Import flows have decreased, positioning the GDP for a possible rebound in the second quarter, with the Atlanta Federal Reserve predicting a growth rate of 3.4%. However, economists warn not to perceive this anticipated rebound as a sign of economic vigor, as retail sales, housing, and labor market data indicate a softening economy.
Lou Crandall, chief economist at Wrightson ICAP, noted that the complexities of foreign trade and inventory adjustments due to tariffs introduced significant measurement challenges that will persist.
From an income perspective, the economy grew at a revised rate of 0.2% in the first quarter, contrasting an initial estimate of a 0.2% decline. Corporate profits were upwardly revised, reflecting a decrease of $90.6 billion during the first quarter but revised upward by $27.5 billion.
The average of GDP and gross domestic income (GDI), also known as gross domestic output, experienced a minor downward revision, dropping at an adjusted 0.1% rate down from the initial 0.2% decline.
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07:01 - 27/06/2025
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01:59 - 27/06/2025
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