Real gross domestic product fell at an annual rate of 0.3% in the first quarter of 2025, according to Bureau of Labor Statistics data released on Wednesday, April 30. It marked the first quarter of negative growth since early 2022.
The economic contraction is a dramatic drop from the 2.4% GDP growth the US experienced in the fourth quarter of 2024. The shrinking was largely due to a 41.3% spike in imports – the biggest in years – as companies and consumers moved to front-load purchases before Trump’s sweeping tariffs went into effect.
Economists surveyed by Dow Jones had hoped the country’s GDP would rise 0.4%, CNBC reported.
“Maybe some of this negativity is due to a rush to bring in imports before the tariffs go up, but there is simply no way for policy advisors to sugarcoat this. Growth has simply vanished,” Fwdbonds chief economist Chris Rupkey told CNBC.
Traditionally, economists consider a recession to be when a country experiences two consecutive quarters of negative GDP growth. The broader picture – including falling consumer confidence, weaker hiring, and inflation worries – suggests mounting pressure on the economy.
Markets plunged immediately after the BLS data release. By 10 a.m., the Dow Jones Industrial Average had lost more than 750 points (1.85%), the S&P 500 dropped about 123 points (2.20%), and the Nasdaq Composite fell by around 461 points (2.64%).
Trump blamed former President Joe Biden for the shrinking GDP, calling it “Biden’s Stock Market, not Trump’s.”
“Our Country will boom, but we have to get rid of the Biden “Overhang,”” he posted on his social media platform Truth Social. “This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
Imports of goods alone jumped 50.9%, according to the data from the BLS’s Bureau of Economic Analysis. The imports erased more than five percentage points from the GDP.
The downturn also reflected consumer spending, which slowed compared to the end of 2024. Investment rose thanks to businesses restocking inventories, particularly in wholesale drugs and smaller store items.
Government spending fell overall, with a sharp drop in federal defense purchases only partly balanced by increased compensation at the state and local level. Those losses were somewhat offset by rising private investment and exports.
Healthcare, housing, and utilities led service spending growth. Nondurable goods outpaced durable goods on the consumer side.
Meanwhile, prices continued to rise.
The personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – increased 3.6% in 2025’s first quarter, up from 2.4% in 2024’s fourth quarter. When removing food and energy, core PCE rose 3.5%.
The shrinking GDP numbers come alongside a weaker-than-expected jobs report from ADP, also released on April 30. Private-sector employers added just 62,000 jobs nationwide in April.
The ADP’s numbers were well below the Dow Jones estimate of 120,000, CNBC reported. April’s jobs numbers were also well behind March’s 147,000 jobs, which the ADP revised down from 155,000.
Education and health services lost 23,000 jobs, while the information sector dropped 8,000. Hiring gains were led by leisure and hospitality, construction, and financial services.
In the Northeast, job growth was mixed. New England lost 33,000 jobs, while the mid-Atlantic added 43,000.
Annual pay for job-stayers rose 4.5% year-over-year, with job-changers seeing a 6.9% pay bump – slightly higher than March.
“Unease is the word of the day,” said ADP chief economist Dr. Nela Richardson. “Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data. It can be difficult to make hiring decisions in such an environment.”
The BLS data also noted that January’s destructive wildfires in Southern California caused an estimated $45 billion in losses but had no measurable impact on GDP.
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https://dailyvoice.com/virginia/arlington/us-gdp-shrinks-03-in-early-2025-first-drop-since-q1-2022/