GDP Report: First Estimate Shows Negative Growth in Q1 2025

Updated on April 30

Real gross domestic product declined by an annual rate of -0.3% in the first quarter of 2025, according to the first estimate report released on April 30 by the Bureau of Economic Analysis.

Trump wants to change how economic growth is measured

The Trump administration is eyeing a change in how gross domestic product (GDP) is measured in the wake of federal spending cuts.

On March 2, Commerce Secretary Howard Lutnik told Fox News that the Trump administration may split government spending from GDP. He said, “You know that governments historically have messed with GDP. They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”

Similar remarks were made by Elon Musk, billionaire and leader of the so-called Department of Government Efficiency (DOGE) on Feb. 28. DOGE has recently taken action to lower government spending, which includes firing thousands of federal employees, freezing federal funding and eliminating government contracts.

It’s unclear why the administration has put the target on GDP data transparency since the Bureau of Economic Analysis (BEA) already breaks down government spending at the federal, state and local levels for each quarter. Those results are published by the BEA on a quarterly basis.

Economic data has shown some disappointing figures that include stubborn inflation levels; fewer hires; and lower consumer spending. Consumer confidence in the economy is down, as well. The latter is largely due to Trump’s recent tariff announcements, according to the Conference Board’s recent survey results.

GDP could be the next concern: On March 3, a forecasting tool published by the Atlanta Federal Reserve showed that GDP could contract by a rate of -2.8% in the first quarter of 2025. If GDP does indeed decline, it would be the first time since the first and second quarters of 2022.

Real gross domestic product decreased by an annual rate of -0.3% in the first quarter of 2025, according to the first estimate report released on April 30 by the Bureau of Economic Analysis.

The decline was primarily due to an increase in imports, largely due to businesses stocking up on foreign goods ahead of President Donald Trump’s tariffs.

The GDP is the market value — in current dollars — of all goods and services produced within the United States in a given period; Real GDP adjusts that measure for inflation. Changes in GDP are expressed on an annualized basis.

Fed projects 1.7% growth for 2025, lower than previous forecast

The latest GDP projections by the Federal Reserve’s Open Market Committee (FOMC) forecasts lower growth for 2025 (1.7%), compared to its December forecast (2.1%), according to the FOMC’s Summary of Economic Projections released after its meeting March 18-19.

In terms of how the Fed might respond to changes in growth, Federal Reserve Chair Jerome Powell said at an event on April 4, “Inflation is going to be moving up and growth is going to be slowing, but to me it's not clear at this time what the appropriate path for monetary policy would be. We're going to need to wait and see how this plays out before we can start to make those adjustments.”

GDP for the first quarter of 2025

The U.S. GDP grew less than the rate it did in the fourth quarter of 2024, according to the first estimate report.

In the first quarter — January, February and March — real GDP contracted by -0.3%, the first estimate shows.

The first quarter growth rate was much lower than what was reported in recent quarters:

2.4% annual rate of growth in Q4 2024.
3.1% annual rate of growth in Q3 2024.
3% annual rate of growth in Q2 2024.
1.6% annual rate of growth in Q1 2024.
3.4% annual rate of growth in Q4 2023.
4.9% annual rate of growth in Q3 2023.
2.1% annual rate of growth in Q2 2023.
2.1% annual rate of growth in Q1 2023.

The second estimate for Q1 2025 GDP will be released on May 29.

Why did GDP decrease in Q1 2025?

The first quarter real GDP decrease is mainly due to an increase in imports, which are subtracted from spending. A decline in government spending was also a contributing factor to the negative growth.

Other factors in the final calculation include increases in investment, consumer spending and exports.

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What did consumers spend money on in Q1 2025?

The increase in imports included:

Consumer goods — except food and automotive — led by medicinal, dental and pharmaceutical preparations.
Capital goods — except automotive — led by computers, peripherals and parts.

The decline in government spending was mainly due to a decline in defense consumption expenditures, offset by an increase in compensation spending in state and local government.

Within consumer spending, increases were recorded in both goods and services.

Among services that saw spending increases were:

Health care.
Housing and utilities.

Among spending on goods, these categories saw the largest increases:

Recreational goods and vehicles.
Motor vehicles and parts.

How did GDP in 2024 compare to recent years?

In 2020, at the beginning of the COVID-19 pandemic, the annual rate of GDP dropped to levels far below even those during the Great Recession, federal data shows. By the end of 2020 and into 2021, GDP rebounded quickly. However, the first two quarters of 2022 showed signs of slowing down before a more robust finish at the end of the year. GDP continued its upward trajectory throughout 2023 and 2024.

In 2024, the U.S. GDP grew 2.8% compared to a 2.9% increase in 2023. The 2024 increase was primarily due to growth in consumer spending, investment, government spending and exports. Imports, which subtract from GDP, also increased.

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