02-May-2025 08:44

The Commerce Department released a report on Wednesday showing the U.S. economy unexpectedly shrank in the first quarter of 2025.

The report said real gross domestic product fell by 0.3 percent in the first quarter after surging by 2.4 percent in the fourth quarter of 2024.

The unexpected dip by GDP primarily reflected an increase in imports, which are a subtraction in the calculation of GDP.

Imports skyrocketed by 41.3 percent in the first quarter as businesses rushed to import goods before tariffs went into effect, subtracting 5.0 percentage points from GDP growth.

A decrease in government spending also weighed on GDP, while increases in investment, consumer spending and exports helped limit the downside.

The Commerce Department also said the slowdown by GDP growth compared to the previous quarter reflected the upturn in imports, a deceleration in consumer spending and a downturn in government spending that were partly offset by upturns in investment and exports.

The report also said the personal consumption expenditures price index spiked by 3.6 percent in the first quarter following a 2.4 percent jump in the fourth quarter.

Excluding food and energy prices, the core PCE price index shot up by 3.5 percent in the first quarter compared with a 2.6 percent surge in the fourth quarter.

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