| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter - Annual Rate | 0.2% | -1.5% to 1.1% | -0.3% | 2.4% |
| Personal Consumption Expenditures - Annual Rate | 1.8% | 4.0% |
Highlights
The advance estimate of first quarter GDP shows growth down 0.3 percent, the first negative quarter since down 1.0 percent in the first quarter 2022. The advance estimate is below the consensus of up 0.2 percent in the Econoday survey of forecasters. Growth was dragged lower mainly by a large widening in the trade deficit that was related to anticipation of higher tariffs and consequently costlier imports.
Two quarters in a row of negative growth is a rule of thumb for determining if the economy is in recession. The first quarter of the year is typically the weakest one. In 2025, this is probably being exaggerated by front-loaded activity to get ahead of expected tariffs. Some of this should be more normal in the second quarter, although growth will feel the effects of elevated uncertainty that will stifle some spending and investment. While the dip in growth in the first quarter is attributable to special factors, the underlying tone is for softer economic conditions and little momentum for future growth.
Net exports is a deficit of $1.262 trillion in the first quarter after $920.1 billion in the fourth quarters. Net exports made a negative contribution of 4.83. Some of the imports of goods went into inventories. The change in private inventories jumps to $181.7 billion in the first quarter from $13.6 billion in the fourth quarter and makes a positive contribution of 2.25.
Personal consumption expenditures are up 1.8 percent in the first quarter and make a smaller than usual positive contribution of 1.21. Spending on durable goods is down 3.4 percent after demand was exhausted in the fourth quarter when spending rose 12.4 percent. Spending on nondurables is up 2.7 percent in the first quarter and up 2.4 percent on services.
Government consumption is down 1.4 percent in the first quarter for a negative contribution of 0.25. Slashing of payrolls, services, and other expenditures had an impact.
Gross investment jumps 21.9 percent in the first quarter and makes a positive 3.60 contribution to growth. Businesses are acting to invest in equipment before prices go up and/or supply chains get disrupted. This will probably borrow activity from future quarters. Fixed investment is up 7.8 percent in the first quarter, with nonresidential fixed investment up 9.8 percent and residential investment up 1.3 percent.
The quarterly PCE index is up 3.6 percent in the first quarter compared to up 2.4 percent in the fourth quarter. The quarterly core PCE index is up 3.5 percent from 2.6 percent in the prior quarter.
Two quarters in a row of negative growth is a rule of thumb for determining if the economy is in recession. The first quarter of the year is typically the weakest one. In 2025, this is probably being exaggerated by front-loaded activity to get ahead of expected tariffs. Some of this should be more normal in the second quarter, although growth will feel the effects of elevated uncertainty that will stifle some spending and investment. While the dip in growth in the first quarter is attributable to special factors, the underlying tone is for softer economic conditions and little momentum for future growth.
Net exports is a deficit of $1.262 trillion in the first quarter after $920.1 billion in the fourth quarters. Net exports made a negative contribution of 4.83. Some of the imports of goods went into inventories. The change in private inventories jumps to $181.7 billion in the first quarter from $13.6 billion in the fourth quarter and makes a positive contribution of 2.25.
Personal consumption expenditures are up 1.8 percent in the first quarter and make a smaller than usual positive contribution of 1.21. Spending on durable goods is down 3.4 percent after demand was exhausted in the fourth quarter when spending rose 12.4 percent. Spending on nondurables is up 2.7 percent in the first quarter and up 2.4 percent on services.
Government consumption is down 1.4 percent in the first quarter for a negative contribution of 0.25. Slashing of payrolls, services, and other expenditures had an impact.
Gross investment jumps 21.9 percent in the first quarter and makes a positive 3.60 contribution to growth. Businesses are acting to invest in equipment before prices go up and/or supply chains get disrupted. This will probably borrow activity from future quarters. Fixed investment is up 7.8 percent in the first quarter, with nonresidential fixed investment up 9.8 percent and residential investment up 1.3 percent.
The quarterly PCE index is up 3.6 percent in the first quarter compared to up 2.4 percent in the fourth quarter. The quarterly core PCE index is up 3.5 percent from 2.6 percent in the prior quarter.
Market Consensus Before Announcement
Growth stalled in Q1 amid uncertainties over tariffs, DOGE, other headwinds, with a rush of imports to beat expected price increases cutting into GDP. The consensus looks for almost no growth at 0.2 percent, down from 2.4 percent in Q4. Many forecasters see contraction coming.
Definition
Gross Domestic Product represents the total value of the country's production during the period and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Data are available in nominal and real (inflation-adjusted) dollars, as well as in index form. Economists and market players always monitor the real growth rates generated by the GDP quantity index or the real dollar value. The quantity index measures inflation-adjusted activity, but we are more accustomed to looking at dollar values.
Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.
Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.
The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.
Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.
Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.
The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.
Description
GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Importance
Gross domestic product is the country's most comprehensive economic scorecard.
Interpretation
When gross domestic product expands more (less) rapidly that its potential, bond prices fall (rise). Healthy GDP growth usually translates into strong corporate earnings, which bode well for the stock market.
The four major categories of GDP -- personal consumption expenditures, investment, net exports and government -- all reveal important information about the economy and should be monitored separately. One can thus determine the strengths and weaknesses of the economy in order to assess alternatives and make appropriate financial investment decisions.
Economists and financial market participants monitor final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.
It is useful to distinguish between private demand versus growth in government expenditures. Market players discount growth in the government sector because it depends on fiscal policy rather than economic conditions.
Market participants view increased expenditures on investment favorably because they expand the productive capacity of the country. This means that we can produce more without inciting inflationary pressures.
Net exports are a drag on total GDP because the United States regularly imports more than it exports, that is, net exports are in deficit. When the net export deficit becomes less negative, it adds to growth because a smaller amount is subtracted from GDP. When the deficit widens, it subtracts even more from GDP.
Gross domestic product is subject to some quarterly volatility, so it is appropriate to follow year-over-year percent changes, to smooth out this variation.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Importance
Gross domestic product is the country's most comprehensive economic scorecard.
Interpretation
When gross domestic product expands more (less) rapidly that its potential, bond prices fall (rise). Healthy GDP growth usually translates into strong corporate earnings, which bode well for the stock market.
The four major categories of GDP -- personal consumption expenditures, investment, net exports and government -- all reveal important information about the economy and should be monitored separately. One can thus determine the strengths and weaknesses of the economy in order to assess alternatives and make appropriate financial investment decisions.
Economists and financial market participants monitor final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.
It is useful to distinguish between private demand versus growth in government expenditures. Market players discount growth in the government sector because it depends on fiscal policy rather than economic conditions.
Market participants view increased expenditures on investment favorably because they expand the productive capacity of the country. This means that we can produce more without inciting inflationary pressures.
Net exports are a drag on total GDP because the United States regularly imports more than it exports, that is, net exports are in deficit. When the net export deficit becomes less negative, it adds to growth because a smaller amount is subtracted from GDP. When the deficit widens, it subtracts even more from GDP.
Gross domestic product is subject to some quarterly volatility, so it is appropriate to follow year-over-year percent changes, to smooth out this variation.
