The US economy shrank at a 0.5 per cent annual pace from January to March as US President Donald Trump’s trade wars disrupted business, the Commerce Department reported on Thursday in an unexpected deterioration of earlier estimates.
The Commerce Department previously estimated that the economy fell 0.2 per cent in the first quarter. Economists had forecast no change in the department’s third and final estimate.
The January to March drop in gross domestic product (GDP) – the nation’s output of goods and services – reversed a 2.4 per cent increase in the last three months of 2024 and marked the first time in three years that the economy contracted. Imports expanded 37.9 per cent, the fastest since 2020, and pushed GDP down by nearly 4.7 percentage points.
Consumer spending also slowed sharply, expanding just 0.5 per cent, down from a robust 4 per cent in the fourth quarter of last year. It is a significant downgrade from the Commerce Department’s previous estimate.
And the Conference Board reported this week that Americans’ view of the US economy worsened in June, resuming a downward slide that had dragged consumer confidence in April to its lowest level since the Covid-19 pandemic five years ago.