Imports rose while consumers spent less

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Gross Domestic Product (GDP): The U.S. economy contracted by 0.5% in Q1 2025, reversing the 2.4% growth in Q4 2024.
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GDP by Industry: Goods-producing industries saw a 2.8% decline; services dropped 0.3%, while government sector output rose 2.0%.
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Corporate Profits: Corporate profits fell by $90.6 billion, though this marked a $27.5 billion upward revision from previous estimates.
The U.S. economy shrank by 0.5% in the first quarter of 2025, according to the U.S. Bureau of Economic Analysis' (BEA) third and final estimate. This decline follows a robust 2.4% expansion in the fourth quarter of 2024, signaling a sharp reversal in momentum as several economic headwinds took hold.
The downturn was primarily driven by a spike in imports subtracting from GDP as per national accounting rules along with declining government spending. Additionally, consumer spending growth slowed and exports were revised downward.
Despite these setbacks, the BEA reported modest gains in investment and consumer spending, offering some counterbalance to the negative pressures. However, the overall economic picture was downgraded from previous estimates; the third estimate reduced GDP growth by 0.3 percentage points compared to the second.
Real final sales to private domestic purchasers, a key measure that excludes trade and government activity, rose 1.9%, down from the earlier estimate of 2.5%.
Slowdown in manufacturing
Industry-level data underscores the breadth of the slowdown. Private goods-producing industries experienced a contraction of 2.8%, led by durable and nondurable goods manufacturing.
Private services-producing sectors also slipped by 0.3%, with declines seen in retail trade, finance and insurance, and transportation and warehousing.
The government sector provided the only notable uplift, with real value added rising 2.0%, partially cushioning the broader economic decline.
Economists will watch this data closely in the current quarter as the economy could be on the brink of a recession. The technical definition of a recession is two consecutive quarters of negative economic growth.
Posted: 2025-06-26 14:07:04