Imports rose while consumers spent less

By Mark Huffman of ConsumerAffairs

June 26, 2025

• Gross Domestic Product (GDP): The U.S. economy contracted by 0.5% in Q1 2025, reversing the 2.4% growth in Q4 2024.

• GDP by Industry: Goods-producing industries saw a 2.8% decline; services dropped 0.3%, while government sector output rose 2.0%.

• 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.

#U.S #economy #shrank #quarter

The gross domestic product dipped 0.3% from January through March

By Mark Huffman of ConsumerAffairs

April 30, 2025

• U.S. economy shrank 0.3% in Q1 2025, reversing the 2.4% growth seen in Q4 2024.

• Rising imports and falling government spending drove the GDP decline, despite gains in consumer spending, investment, and exports.

• Inflationary pressures intensified, with the PCE price index rising 3.6% and core inflation (excluding food and energy) hitting 3.5%.

The first sign of a potential recession has appeared in the U.S. economy. The U.S. Bureau of Economic Analysis, in its first estimate of first quarter gross domestic product, reports the economy shrank by 0.3% after rising 2.4% in the fourth quarter of 2024.

The official definition of a recession is two consecutive quarters of negative growth.

The primary causes of the economic pullback were a notable increase in imports, which subtract from GDP calculations, and a downturn in government spending. These factors outweighed continued, albeit slower, growth in consumer expenditures, as well as gains in private investment and exports.

Slower consumer spending

The BEA reported that the downturn from Q4 to Q1 was characterized by an upturn in imports, a deceleration in consumer spending, and reduced public sector expenditure. While business investments and exports rebounded, they were insufficient to fully offset the negative impacts.

Despite the headline GDP contraction, some underlying components of the economy showed strength. Real final sales to private domestic purchasersa measure that excludes trade and government activity and reflects core demand from U.S. consumers and businessesrose by 3.0%, a slight increase from 2.9% in the previous quarter. This suggests that private-sector demand continues to underpin economic activity, even amid broader headwinds.

Inflation accelerates

Inflationary pressures also intensified in the first quarter. The price index for gross domestic purchases, which tracks the prices paid by U.S. residents, rose 3.4%, up from 2.2% in the fourth quarter of 2024. The personal consumption expenditures price indexa key inflation gauge for the Federal Reserveclimbed 3.6%, while core PCE inflation, which excludes the more volatile food and energy categories, rose by 3.5%.

The advance estimate may be subject to revisions as more complete data become available in the coming months. Still, the early figures suggest that while the broader economy encountered turbulence in early 2025, private sector activity remains relatively robust.

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