The U.S. Bureau of Economic Analysis’ (BEA) latest estimate of first-quarter gross domestic product (GDP) remained negative as consumer spending was revised lower amid rising economic uncertainty.
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The BEA now expects first-quarter GDP to fall by 0.5% on an annualized basis compared to its prior estimate for a drop of 0.2%. If the estimate holds, it would mark the first quarter of negative GDP growth since the -1.0% decline in the first-quarter of 2022. It would also reverse a 2.4% gain in the fourth-quarter.
Rising Imports and Lower Consumer Spending Hit GDP
Many businesses rushed to import foreign products during the first quarter in order to front-run President Trump’s tariffs. This strategy lowers GDP because imports are subtracted from the calculation.
Meanwhile, consumers spent less on travel and leisure, as the BEA revised its transportation and recreation services figures lower. In total, consumer spending growth was revised to 0.5%, down from 1.2%.
The sustained negative GDP estimate doesn’t bode well for the stock market. Historically, a recession has been loosely defined as two consecutive quarters of negative GDP growth.
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