Consumer spending also slowed sharply, expanding just.0.5%, down from a robust 4% in fourth-quarter 2024 and sharp downgrade from the Commerce Department’s previous estimate.
A category within the GDP data that measures the economy’s underlying strength rose at a 1.9% annual rate from January through March, down from 2.9% in the fourth quarter of 2024. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
And federal government spending fell at a 4.6% annual pace, the biggest drop since 2022.
Trade deficits reduce GDP. But that’s just a matter of mathematics. GDP is supposed to count only what’s produced domestically, not stuff that comes in from abroad. So imports — which show up in the GDP report as consumer spending or business investment — have to be subtracted out to keep them from artificially inflating domestic production.
The first-quarter import influx likely won’t be repeated in the April-June quarter and therefore shouldn’t weigh on GDP. In fact, economists expect second-quarter growth to bounce back to 3% in the second quarter, according to a survey of forecasters by the data firm FactSet.
The first look at April-June GDP growth is due July 30.
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This story has been corrected to show that the drop in federal spending was the biggest since 2022, not 1986.
Credit: AP
Credit: AP