GDP Declined 0.3% in Q1

Washington, DC, April 30, 2025-Real gross domestic product (GDP) decreased at an annual rate of 0.3% in Q1 2025 (January, February, and March), according to the advance estimate released by the U.S. Bureau of Economic Analysis. In Q4 2024, real GDP increased 2.4%.

The decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending, and exports. 

Compared to Q4, the downturn in real GDP in Q1 reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending that were partly offset by upturns in investment and exports.

Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment, increased 3.0% in Q1, compared with an increase of 2.9% in Q4.

The price index for gross domestic purchases increased 3.4% in Q1, compared with an increase of 2.2% in Q4. The personal consumption expenditures (PCE) price index increased 3.6%, compared with an increase of 2.4%. Excluding food and energy prices, the PCE price index increased 3.5%, compared with an increase of 2.6%.

“The U.S. economy contracted in the first three months of 2025, as businesses rushed to stock up on imports ahead of tariffs.

“That was the steepest decline since the first quarter of 2022.

“Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter.

“‘The headline decline overstates weakness because a lot of that was tariff-induced pull-forward,’ said Shannon Grein, an economist at Wells Fargo. ‘Overall, I think that it was a relatively solid underlying report when it comes to demand.’

“The reading fell short of the 0.4% growth that economists surveyed by The Wall Street Journal expected.”