A Bumpy Start: 0.3% GDP Contraction
The U.S. economy stumbled out of the gate in Q1, with GDP shrinking at a 0.3% annualized rate, according to the U.S. Bureau of Economic Analysis. After eking out 2.4% growth in Q4 2024, this sudden reversal has sparked fresh concerns about a looming recession.
A Record Drag from Trade
Net exports were the biggest drag on record, subtracting 4.83 percentage points from growth as companies stockpiled imports ahead of higher tariffs. Meanwhile, exports rose, but couldnt offset the swelling import tab.
Consumer and Government Spending
Consumer spending—two-thirds of GDP—grew just 1.8%, down from 4.0% last quarter. That added 1.21 points to growth. On the flip side, federal government spending plunged 5.1%, shaving 0.33 points off GDP.
Voices on Recession Risks
"The U.S. economy is at a greater risk of recession now than it was a month ago, but this 0.3% contraction in Q1 GDP is not the start of one," say Wells Fargo economists. University College London's James Boys adds that political uncertainty is piling pressure on the Federal Reserve to cut rates.
Wei Liang of the China Institutes of Contemporary International Relations warns that without rolling back aggressive tariff and austerity measures, the downturn could spiral: "A vicious cycle of panic and economic decline is feeding off each other."
Harvard's Lawrence Summers calls the first 100 days "probably the least successful … on the economy in the last century," highlighting falling markets, rising recession odds, and collapsing consumer confidence. University of Michigan economist Justin Wolfers puts recession odds at 55%, up from 10% on inauguration day.
Uncertainty Looms for Q2
With half of S&P 500 companies reporting earnings, many are warning that the on-again-off-again tariff policies make planning a nightmare. Analysts warn that without policy shifts, the U.S. could see a second straight quarter of negative growth, pushing a technical slowdown toward a deeper downturn.
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U.S. economy shrinks in Q1 amid Trump tariffs, recession concerns grow
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