US GDP Shrinks More Than Thought on Weak Spending

The U.S. economy experienced a deeper contraction than initially reported during the first quarter because consumer spending decreased due to trade disruptions caused by extensive import tariffs.

The Commerce Department reported that Gross domestic product decreased at an annualized 0.5% rate which was lower than the initial 0.2% prediction. The initial pre-tariff buying surge led to a 0.5% consumer spending growth revision from the previous 1.2% estimate.

The previous quarter achieved a strong 2.4% growth rate but domestic demand growth decreased to 1.9%. The significant increase in imports before tariffs took effect strongly contributed to the economic decline but the reduction in these flows suggests that second-quarter growth will improve. The Atlanta Fed predicts that GDP will increase by 3.4% during this quarter.

The upcoming economic growth may not demonstrate genuine economic power according to economic experts. The data shows declining performance across retail sales and housing and labor market indicators. The economy expanded 0.2% from the income perspective because corporate profits increased.

The unstable trade situation makes it difficult to measure economic performance accurately while experts predict that inventory and import-related distortions will affect data throughout multiple months.