The Commerce Department, in an unexpected downgrade from its prior estimate, reported Thursday that the U.S. economy shrank at a 0.5% annual pace during the first quarter of 2025, according to the Associated Press.
January-March growth sagged as U.S. companies rushed to import foreign goods before President Donald Trump could implement his promised tariffs. The Commerce Department previously estimated that the economy fell 0.2% in that time period, and economists had anticipated no change in the department’s third and final estimate.
The drop in gross domestic product (GDP) from January-March reversed a 2.4% increase in the fourth quarter of 2024 and marked the economy’s first contraction in three years. Imports grew 37.9% — the fastest since 2020 — and weighed down the GDP by roughly 4.7 percentage points.
Consumer spending was also sharply down, expanding at just 0.5%.
A category within the GDP data that measures the underlying strength of the economy — which includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending — was up at a 1.9% annual rate in 2025’s first quarter.
