During the first quarter of this year, real gross domestic product (GDP) in the U.S. fell at an annual rate of 0.3%, according to data released Wednesday by the Bureau of Economic Analysis. What does this mean for our economy?
Per the BEA, GDP refers to the total market value of the final goods and services produced within the country. It is a measure that helps compare the U.S. economy with others around the world and it informs decisions about taxes, spending, hiring, investing, interest rates, trade policy and more.
While the GDP increased by 2.4% during the final quarter of last year, while former President Joe Biden was in office, it decreased from January to March, the first months of President Donald Trump’s second term. Trump has made tariffs a key feature of his economic policy so far, a move that has generated concern about increased prices for goods imported to the U.S.
“The decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending,” said the BEA. “These movements were partly offset by increases in investment, consumer spending, and exports.”
According to CBS News’ MoneyWatch, businesses have “rushed to stockpile goods ahead of President Trump's sweeping tariff policies,” and therefore the GDP numbers might not show the entire economic picture. Still, some economists are also worried that the tariff plans could push the U.S. into a recession this year, the outlet noted.
It also noted that the GDP numbers reflect the “worst quarterly performance for the U.S. economy since early 2022, when the economy was in recovery after cratering during the COVID pandemic,” even though polling from FactSet indicated that economists previously expected 0.8% growth to kick off 2025. Now, economists expect the economy to slow to 1.9% this year, CBS News reported.
In an interview with WWL, Bankrate senior economic analyst Mark Hamrick explained that, when it comes to the economy, there are two types of data that experts look to. One type is “soft data” about consumer sentiment and psychology and the other is “hard data” that measures actual activity.
“Broadly speaking – and I’m speaking in the very broadest terms – a lot of the hard data has remained upbeat or, I would say, in line with trends that we saw toward the end last year,” Hamrick said. “But it is really, the sentiment data that is looking very, very weak.”
Going into the 2024 election, voters identified inflation and elevated prices as the number one economic issue, he noted, adding: “Now they think it's getting worse than what it was before and so, that puts us in a bad place, attitudinally.”
While Hamrick said the soft data might look worse than the hard data, he also said that inflation has not substantially improved since Trump took office. In fact, he said that the Federal Reserve Bank’s main gage of inflation is expected to rise at a year-over-year rate of 2.5%, which is better than peak COVID-19 pandemic-related inflation, but still over the Fed’s target rate.
“We’ve got a jobs report this week… it’s expected to show… slower hiring on the month compared to the 288,000 jobs that were added in February,” he added.
BEA mentioned that decrease in government spending impacted economic growth. Trump’s new administration has also been marked by sweeping government cuts spearheaded by the Department of Government Efficiency (DOGE).
CBS News reported Wednesday that numbers released this week by ADP Research are also a “red flag” for the U.S. economy. That ADP report found that Private sector employment increased by 62,000 jobs in April and CBS said that was “far fewer than the 134,000 jobs that had been forecast by economists, according to FactSet.”
Trump’s announcements about tariffs also spurred a stock market roller coaster ride as investors braced for the impact of the fees on imported goods. In a Wednesday Truth Social post, the president blamed his predecessor for the current state of the stock market.
“This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers,” he said. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!:”