US Economy Contracts More Than Expected in Q1

2025-06-26 12:36 By Joana Taborda 1 min. read

The US economy contracted at an annualized rate of 0.5% in Q1 2025, a sharper decline than the second estimate of a 0.2% drop and the first quarterly contraction in three years.

The weaker GDP figure was largely driven by significant downward revisions to consumer spending and exports.

Consumer spending rose just 0.5%, the slowest pace since the sharp declines of 2020, down from 1.2% in the previous estimate.

Exports grew only 0.4% compared to the earlier estimate of 2.4%.

These declines were only partially offset by a downward revision to imports (37.9% vs 42.6%).

The sharp rise in imports reflected a rush by businesses and consumers to stockpile goods ahead of anticipated price increases stemming from a series of tariff announcements.

Meanwhile, federal government spending dropped 4.6%, the steepest decline since Q1 2022, and in line with the second estimate.

Fixed investment rose by 7.6%, the strongest gain since mid-2023, but slightly less than 7.8% in the early reading.



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