US economy contracts 0.5% in Q1 2025

The US economy contracted in the third estimate for the first quarter of the year, weighed down by rising imports and lower government spending.

Official data released on Thursday showed that US real gross domestic product (GDP) shrank at an annualized rate of 0.5% in Q1 2025, compared to a 0.2% contraction in the second estimate. The downward revision reflected weaker consumer spending and exports, despite a cut in import estimates.

According to the Bureau of Economic Analysis, the GDP contraction was driven by a slowdown in consumer spending and a decline in government expenditures, partially offset by an increase in investment.

The agency also revised up its estimate for the personal consumption expenditures (PCE) price index to 3.7%, from 3.6% in the first and second readings. The core PCE index, which excludes food and energy, was also revised higher to 3.5%, from 3.4% in the previous estimate.