The U.S. economy contracted in the first three months of 2025 for the first time in three years, raising recession fears at the start of President Donald Trump's second term, as he engaged in a trade war with several countries.
GDP, the total of goods and services produced from January to March, fell at an annual rate of 0.3%, according to a report from the Commerce Department released on Wednesday. This is the first reading issued for this quarter.
Economists were expecting a 0.2% increase following a 2.4% rise in GDP in the last quarter of 2024.
This is the first quarterly decline in GDP growth since the first quarter of 2022.
This decline was driven by a significant increase in imports. In contrast, total sales to domestic buyers, another indicator of demand within the economy, grew at an annual rate of 3% during the first quarter, surpassing the 2.9% rate recorded in the fourth quarter of 2024.
Meanwhile, the core personal consumption expenditures index, which excludes volatile categories like food and energy, rose by 3.5% during the first quarter, surpassing estimates of 3.2% and higher than the 2.6% recorded in the previous quarter.
This report measures economic activity during the first three months of the year ending in March, meaning it reflects the performance of the U.S. economy before President Donald Trump's announcement on April 2nd of new tariffs, which raised the effective tariff rate to its highest level in over a century.
Economists and the Federal Reserve were expecting tariffs to push inflation rates higher and weigh down economic growth in the coming quarters.
Stock futures fell on Wednesday after data showed the U.S. economy contracted in the first quarter.