The U.S. economy contracted by 0.3% in this year’s first quarter, heightening concerns that America is headed for a recession.
Gross Domestic Product (GDP), which measures the goods and services produced by a nation, fell at a 0.3% annualized pace between January and March, according to data released by the U.S. Commerce Department.
The contraction comes as U.S. President Donald Trump wages a costly trade war with the wider world, including neighbouring Canada.
U.S. stock indices sold off on news of the negative economic growth in the first quarter, with the benchmark S&P 500 index falling 1.40% and the blue-chip Dow Jones down 300 points.
The economic decline in Q1 was much worse than had been anticipated on Wall Street and among economists.
A Dow Jones survey of economists showed that the consensus expectation was for the U.S. economy to gain 0.4% during the first quarter.
GDP in America rose an annualized 2.4% in the fourth and final quarter of 2024.
The latest data showed that U.S. imports soared in Q1 of this year as companies scrambled to bring in foreign goods ahead of President Trump’s tariffs coming into effect.
Imports into America rose 41% in the quarter, driven by a 50% increase in goods. At the same time, U.S. exports rose only 1.8% during the period.
Also of concern is consumer spending, which slowed during the year’s first three months.
Personal consumption expenditures increased 1.8% for the period, the slowest quarterly gain in two years and down from a 4% gain in the fourth quarter of 2024.
The latest GDP figures arrive a day after the Conference Board’s Consumer Confidence Index fell to 86 in April, down 7.9 points from its previous reading and the lowest level since the Covid-19 pandemic struck five years ago.
Worse, the Conference Board’s expectations index, which measures respondents outlook for the next six months, fell to 54.4, its lowest level since 2011 and a reading that’s consistent with an economic recession.