U.S. Economy Contracts in Q1 2025; GDP Declines 0.5%

The U.S. economy contracted at an annual rate of 0.5% in the first quarter of 2025, marking a worse-than-expected decline, according to the latest data released by the U.S. Bureau of Economic Analysis (BEA) on Thursday. This figure was a revision downward from the previously reported -0.2%, signaling a more significant slowdown in economic activity than earlier anticipated.

The contraction in real GDP for the first quarter was primarily driven by an increase in imports, which serve as a negative factor in GDP calculations, as well as a reduction in government spending. While these factors weighed heavily on the overall economic output, they were partly offset by increases in private investment and consumer spending, which provided some support to the economy during the period.

The BEA further revised its initial estimate, with the GDP now reflecting a 0.3 percentage point downward adjustment from the second estimate. This revision was mainly driven by reductions in consumer spending and exports. However, this negative impact was partly mitigated by a downward revision to imports, which ultimately helped soften the extent of the economic contraction.

Overall, the report highlights growing concerns over the sustainability of U.S. economic growth, as both government spending and exports showed signs of weakness in the first quarter. This data comes amid an uncertain global economic environment, where inflationary pressures, trade tensions, and geopolitical risks continue to shape the economic landscape. With a contraction in the first quarter, the outlook for the remainder of the year remains uncertain, and economists will closely monitor upcoming data for signs of recovery or further slowdowns in U.S. economic activity.