US first-quarter GDP: Economy shrank 0.5% amid trade policy uncertainty

The American economy contracted in the first quarter, as the definitions increased the shipments of importers before the object entered into the effect.

The Economic Analysis Office of the Ministry of Trade (Bea) issued its third appreciation for the GDP in the first quarter (GDP), which found that the American economy had contracted an annual rate of 0.5 % in the first quarter, which will continue from January to March.

Economists included in the poll by LSEG will reduce the economy at a rate of 0.2 % in a quarter, in line with the second initial reading. The contraction comes after recording 2.4 % of GDP in the fourth quarter.

The contraction of the gross domestic product by 0.5 % shown in the numbers of GDP in the first quarter is the first quarterly contraction since the first quarter of 2022.

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The decrease in gross domestic product is primarily due to the increase in imports along with a decrease in government spending. These transformations have been partially compensated by increases in investment and consumer spending.

Imports increased by 37.9 % in the first quarter, and constituted a 4.66 % contraction in GDP, as companies increased imports in an attempt to reduce the effect of President Donald Trump’s tariff, which is taxes on imported goods. In the gross domestic product account, imports are offered because the scale aims to measure local production.

Government spending decreased by 0.6 % compared to the previous quarter, with a decrease of 4.6 % in federal spending partially corresponding to 2 % by local governments.

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Consumer spending increased by 0.5 % in the first quarter, with goods on the goods increased by 0.1 % and services that increase 0.6 %, compared to the previous quarter.

The private investment increased by 23.8 % in the first quarter, after a decrease of 5.6 % in the fourth quarter.

The available personal income was 2.5 % in the first quarter, unchanged from the fourth quarter. Personal savings as a percentage of available income were 4.3 %, an increase of 3.8 % at the end of last year.

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“The data confirm that the anxiety of the customs tariff stimulated the front loading of the activity early in the year-companies rushed to import goods before new duties, while consumers accelerated some elements to avoid high prices,” said the chief economist at Ey Gregory Daco.

Imports increased by 37.9 % in the first quarter and formed a 4.66 % contraction in GDP. (Photo by Joe Raidl / Getty Emoxz / Getty Pictures)

Daco added: “The timing of these wild fluctuations in demand and supply has been made through quarters so that the Q1 and Q2 GDP prints are more reflected in the fog of tariffs than reading clear economic flows.”

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“The decrease in the GDP in the first quarter was a more touch than it was previously thought, but the details are more worrying due to the descending review of the real final sales of local buyers and the economy engine,” said Ryan Sowet, chief American economist in Oxford Economic.