The US economy shrunk at an annual rate of 0.3% in the first three months of the year, the Commerce Department says.
That marked a sharp downturn after growth at an annual pace of 2.4% in the previous quarter, though the fall was not as severe as some analysts had predicted.
The decline was driven by drop in government spending and a more than 40% surge in imports – which count against growth – as companies raced to get ahead of the tariffs.
Consumer spending growth also slowed from the end of last year, with growth of 1.8%, down from 4% in the prior quarter.
Treasury Secretary Scott Bessent just yesterday urged people to focus less on sentiment and more on the hard data as they try to evaluate how the economy is doing.
This report, which focuses on a period before US President Donald Trump’s most far-reaching tariffs were announced, is unlikely to settle the debate.
The surge in companies rushing to bring in more goods from overseas ahead of import taxes kicking in has been the main driver behind the US economy contracting.
However, some economists are suggesting the downturn could prove to be a one-off.
While the first three months of the year saw imports rise some 41.3%, “the surge now appears to be going into reverse,” according to Paul Ashworth, chief North America economist at Capital Economics.
That makes sense given a lot of firms shipped in the goods they wanted before the tariffs – and might be now looking for alternative and/or American-based suppliers, which is what Trump wants in order to boost American manufacturing.
Ashworth predicts imports falling going forward will likely lead to the economy bouncing back in the next few months.
US President Donald Trump has shared his thoughts on the economy after GDP figures were announced this morning, which indicates the US economy shrank 0.3% in first three months of this year.
Trump’s Reaction:
On Truth Social, Trump claims: “this is Biden’s Stock Market, not Trump’s”.
“I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers,” he says in a post on his Truth Social account.
“Our Country will boom, but we have to get rid of the Biden “Overhang.” This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
