U.S. Economy Shrank 0.5% in Q1

Washington, DC, June 26, 2025-The U.S. economy contracted at an annual rate of 0.5% in the first quarter of 2025, according to the Commerce Department’s third estimate, marking the first quarterly decline in GDP since early 2022.

The downturn was sharper than previously reported (−0.3% first, −0.2% second) and is largely attributed to a surge in imports as businesses rushed to bring in goods ahead of anticipated tariffs, according to the Wall Street Journal. This spike in imports-up nearly 40%-subtracted significantly from GDP, offsetting gains in other areas.

Consumer spending, a key driver of the economy, slowed dramatically, increasing just 0.5% after a strong 4% gain in the previous quarter. Federal government spending also declined by 4.6%, further weighing on economic output. 

Despite the headline contraction, underlying domestic demand showed modest strength, with real final sales to private domestic purchasers rising by 2.5%, suggesting resilience in household and business investment.