US Economy Contracts 0.2% in Q1 2025

The U.S. economy contracted at an annualized rate of 0.2% in the first quarter of 2025, marking the first quarterly decline in three years and a reversal from 2.4% growth in the previous quarter. The downturn was driven by a sharp increase in imports, which subtracted 4.8 percentage points from GDP, and by reduced government spending. Although business investment in equipment surged nearly 10% and consumer spending grew modestly, these gains were insufficient to offset the negative trade balance. Inflationary pressures persisted, with the core Personal Consumption Expenditures price index rising to 3.5%. Analysts attribute the contraction to ongoing trade disputes and policy uncertainty, warning that economic performance may remain subdued. Early second-quarter indicators suggest continued weak growth.