>The US economy contracted at the start of the year for the first time since 2022 on a monumental pre-tariffs import surge and softer consumer spending, a first snapshot of the ripple effects from President Donald Trump’s trade policy.
>Inflation-adjusted gross domestic product decreased an annualized 0.3% in the first quarter, well below average growth of about 3% in the prior two years, according to the government’s initial estimate published Wednesday. Net exports subtracted nearly 5 percentage points from GDP, the most on record, the Bureau of Economic Analysis report showed.
>Consumer spending — which accounts for two-thirds of GDP — advanced at a 1.8% pace, the weakest since mid-2023. Business outlays for equipment, the lone bright spot in the report, increased an annualized 22.5%.
|Indicator|Actual|Estimate|
|:-|:-|:-|
|GDP|\-0.3%|\-0.2%|
|Personal consumption|\+1.8%|\+1.2%|
|PCE price index, excl. food, energy|\+3.5%|\+3.1%|
>The GDP data highlight the scramble by companies to secure merchandise ahead of expansive tariffs. Looking ahead, many economists anticipate the higher duties will cause a supply shock, challenging businesses and leading to a pullback in demand as higher prices push cash-strapped Americans closer to the brink.
>Forecasters currently see nearly even odds of the US falling into a recession in the next year. Consumers are also growing increasingly anxious that tariffs will take a toll on the labor market and drive up the cost of living.
>The latest GDP figures showed imports surged an annualized about 41% — the biggest advance in nearly five years. Because these goods and services aren’t produced in the US, they are subtracted from GDP. Economists see the sharp widening of the trade deficit reversing in the second quarter.
>Typically, imported merchandise moves into warehouses or directly to storefronts. However, the report showed business inventories contributed 2.25 percentage points to GDP during the quarter, the most since the end of 2021. The recent flood imports may instead show up in higher inventories in coming months and, along with a narrowing trade gap, provide a lift to second-quarter GDP.
>Because swings in trade and inventories can sometimes distort overall GDP, economists prefer looking at final sales to private domestic purchasers for a better snapshot of demand. This measure increased at a 3% pace in the first quarter after rising an annualized 2.9% at the end of 2024.
>Growth in consumer spending was driven by services and nondurable goods.
Link: [https://www.bloomberg.com/news/articles/2025-04-30/us-economy-contracts-for-first-time-since-2022-on-imports-surge](https://www.bloomberg.com/news/articles/2025-04-30/us-economy-contracts-for-first-time-since-2022-on-imports-surge)
