U.S. Economy Contracted in First Quarter of 2025
In the first quarter of 2025, the U.S. economy contracted by 0.3%, marking its first decline since early 2022, according to the Bureau of Economic Analysis. This downturn was primarily driven by a 41.3% surge in imports, as businesses accelerated purchases to preempt impending tariffs. The spike in imports contributed to a record-high trade deficit, subtracting more than five percentage points from the headline GDP figure. Consumer spending growth slowed to 1.8%, the weakest in seven quarters, while federal government spending decreased by 5.1%, partially offset by a modest 0.8% increase in state and local expenditures.
Despite the overall contraction, certain sectors exhibited resilience. Nonresidential fixed investment rose by 9.8%, with significant increases in equipment and intellectual property products. Residential fixed investment posted a 1.3% gain, driven by a 5.9% rise in single-family structures and a 3.6% increase in improvements, although multifamily structures declined by 11.5%. Inflationary pressures persisted, with the GDP price index rising 3.4% and the Personal Consumption Expenditures Price Index increasing by 3.6% in the first quarter.