American economy shrinks during first quarter of 2025

WASHINGTON, May 29 (YPA) – The U.S. economy contracted by 0.2% in the first quarter of the year, affected by weak consumer spending and an increase in the trade deficit, according to the second estimate from the Bureau of Economic Analysis.

This decline revised the initial estimate, which indicated a contraction of 0.3%.

The data showed consumer spending growth of 1.2%, compared to a previous estimate of 1.8%. Net exports also contributed to a 4.9 percentage point reduction in GDP, a larger impact than expected. In contrast, the revision reflected an increase in business investments and inventories, without federal government spending being a significant hindrance.

The government periodically reviews the GDP with the availability of new data, where the preliminary estimate revealed an economic contraction for the first time since 2022. The final estimate will be released next month.

The decline is attributed to an increase in imports as companies attempted to preempt Trump’s tariffs, along with a moderation in consumer spending and a decrease in government spending. However, a rebound is expected in the second quarter due to the accumulation of import inventories and the reduction of the tariff impact.

Economists are monitoring the impact of Trump’s policies on trade, immigration, and taxes on future spending.

YPA