U.S. Economy Contracted in First Quarter of 2025
The U.S. economy contracted at an annual rate of 1.6% in the first quarter of 2025, according to the Bureau of Economic Analysis. This decline follows modest growth of 3.4% in the fourth quarter of 2024 and reflects weaker consumer spending, a drop in private inventory investment and reduced government expenditures. It marks the first negative GDP reading since mid-2022, raising concerns about the momentum of the broader recovery.
Residential fixed investment declined at a 4.9% rate, driven by reduced single-family construction and slowing multifamily activity. Consumer spending on goods fell 1.2%, while spending on services increased slightly. Despite the downturn, inflation remained elevated, with the PCE price index rising 3.4%—a sign that the Federal Reserve may maintain its cautious monetary policy stance even as growth cools.
