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The U.S. economy unexpectedly contracted by 0.3% year-on-year in the first quarter of 2025, according to data released Wednesday by the U.S. Bureau of Economic Analysis.
This reignited recession concerns amid President Donald Trump’s continued protectionist trade policies.
This marked the first contraction in the U.S. economy since the first quarter of 2022. By contrast, U.S. gross domestic product (GDP) had expanded by 2.4% year-on-year in the final quarter of 2024 and grew by 2.8% for the entire year.
Growth forecasts had anticipated a 0.2% expansion for the January–March period.
“The decrease in GDP in the first quarter primarily reflected an increase in imports, which are subtracted in the calculation of GDP, and a decline in government spending,” the report said.
While imports rose sharply and consumer spending slowed, the negative impact was partially offset by increases in private investment and exports.
“Compared to the fourth quarter, the downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending, which were partly offset by upturns in investment and exports,” the bureau added.
The personal consumption expenditures (PCE) price index rose by 3.6% in the first quarter, up from a 2.4% increase recorded in the final quarter of 2024. The core PCE price index, which excludes food and energy prices, climbed by 3.5% over the same period.
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