US GDP contracted at an annual rate of 0.3% in the first quarter, the Commerce Department said in its advance estimate today.
Real final sales to private domestic purchasers, a measure of underlying demand, advanced 3.0% after a 2.9% rise. The price index for gross domestic purchases quickened to 3.4%. The personal consumption expenditures price gauge rose 3.6%; the core measure, which strips out food and energy, was up 3.5%.
Bea stated,
“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. These movements were partly offset by increases in investment, consumer spending, and exports.”
This means that a reduction in government spending and front-running of imports due to tariff fears has led to a mathematical fall in GDP. However, this is not simply a story of politics, as public consumption also fell 2.2%. The optics are poor, and when the actual tariff impact plays out in Q2, we could see a further decline, signaling a recession.
The reading follows a 2.4% pace in the fourth quarter of 2024 and a median forecast of 0.4 percent. BEA’s estimate will be revised on May 29 and June 26.
Trading Economics forecasted 0.5% growth while the general consensus was 0.3%.
On the news, Trading Economics adjusted its Q2 forecast to -1.2%, indicating a technical recession is now very likely. The odds of a recession in the Polymarket jumped to 71%.
Before the release, Bitcoin, oil, and equities dipped slightly while gold ticked up.
As the data was released, Bitcoin fell 0.5% on the news, with S&P 500 futures falling 0.77% and US 10-year Treasury yields rising 0.35%.
Real-time trackers diverged ahead of the release: the Atlanta Fed’s GDPNow model pointed to -2.7% as of April 29, while the New York Fed’s Staff Nowcast stood at 2.6 percent. Consensus has shifted repeatedly as soft manufacturing data offset firmer housing and services prints.
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