The U.S. economy contracted more than initially estimated in the first quarter of the year, largely due to sluggish consumer spending and distortions caused by preemptive import activity ahead of tariffs. According to the Commerce Department’s latest data, gross domestic product (GDP) declined at an annual rate of 0.5 percent, down from the previously reported 0.2 percent drop. The revision primarily reflects a sharp downgrade in consumer spending, which is now estimated to have grown by only 0.5 percent instead of the earlier 1.2 percent figure.
In contrast, the economy had expanded at a 2.4 percent pace in the final quarter of the previous year. Domestic demand was also revised lower, now rising at just 1.9 percent rather than 2.5 percent. A surge of imports contributed significantly to the decline in GDP, as businesses accelerated shipments to stockpile goods before President Donald Trump’s tariffs on imported products took effect. The temporary boost to consumer spending from this stockpiling, particularly in vehicles, has since faded, weighing further on economic activity.
While imports have slowed, potentially setting the stage for a GDP rebound in the second quarter, economists urge caution. The Federal Reserve Bank of Atlanta predicts a 3.4 percent growth rate for the current quarter, but analysts warn this may not reflect real economic strength. Weaker indicators in retail sales, housing, and labor markets suggest underlying softness.
Measured from the income side, the economy performed slightly better, with gross domestic income (GDI) revised upward to a 0.2 percent increase. Corporate profits also saw a revision, with a smaller-than-expected decline. When averaged, GDP and GDItogether called gross domestic outputfell at a revised rate of 0.1 percent, offering a more balanced view of economic performance.
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