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The United States economy contracted by 0.3% in the first quarter of 2025, marking the weakest growth since early 2022. According to the Bureau of Economic Analysis, this decline in gross domestic product (GDP) was primarily due to increased imports and decreased government spending. The contraction surprised many economists, who had forecasted a 0.4% growth for the quarter.
The negative GDP growth, which is rare for the U.S., has raised concerns about a potential recession. A technical recession occurs when economic output contracts over consecutive quarters. If the GDP continues to decline in the second quarter, it could signal a recession. Some experts, including BlackRock CEO Larry Fink, believe the U.S. may already be on the brink of a recession. Major banks, such as JPMorgan Chase, estimate a 60% chance of a recession occurring this year.
The contraction comes amid ongoing trade tensions, as President Donald Trump has implemented aggressive tariffs that have impacted the economy. These tariffs, described by Goldman Sachs economists as akin to a tax hike, have tightened financial conditions and increased uncertainty for businesses. The recent GDP report includes data up to March 31, just before President Trump's "Liberation Day" tariff announcement, which led to significant stock market losses.
Despite the negative GDP reading, other economic indicators like job growth and retail sales suggest a steady economy. However, consumer confidence has declined, with the University of Michigan's sentiment poll showing the weakest results since July 2022. The disconnect between hard data and consumer sentiment highlights the complexity of the current economic landscape.