U.S. GDP contracts in Q1, price index jumps
Apr. 30, 2025 8:31 AM ET
By: Liz Kiesche, SA News Editor
The advance estimate of U.S. real GDP indicated a 0.3% Q/Q decrease in Q1, on an annual rate, weaker than the +0.2% consensus and reversing from the 2.4% growth logged in Q4 2024, according to data released by the Bureau of Economic Analysis on Wednesday.
The PCE price index increased 3.6% Q/Q, up from 2.4% in Q4. Excluding food and energy prices, the core PCE price index jumped 3.5% vs. 2.6% in the prior quarter.
The drop in real GDP in Q1 reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decline in government spending. Those were partly offset by increases in investment, consumer spending, and exports, the BEA said.
Wednesday's GDP report followed the March trade in goods report on Wednesday that showed the goods trade deficit swelled, as businesses and consumers stocked up on things as tariffs were expected to climb.
Joseph Brusuelas, chief economist at RSM US, pointed out that the Q/Q decline in real GDP was the result of the trade deficit, but real final sales to domestic private purchases, known as core GDP, rose 2.3% Q/Q. "The takeaway: the trade shock caused a large change in behavior that resulted in that large drag due to a larger trade deficit. However, the economy did NOT slide into recession in Q1’25," he wrote on X.
Markets weren't assuaged. Nasdaq futures slid 1.5%, S&P futures dipped 1.0%, and Dow futures slipped 0.6%. The US 10-year Treasury yield ( US10Y) jumped 3 basis points to 4.21%. |
