The United States economy contracted more sharply than previously estimated in the first quarter of 2025, marking the first economic shrinkage in three years.
Gross domestic product (GDP) declined at an annualised rate of 0.5% from January through March, according to the Commerce Department's third and final estimate released Thursday.
The initial estimate projected a 0.3% drop, later revised to a 0.2% decline.
The downturn was largely attributed to a wave of imports as companies and households rushed to buy foreign goods ahead of the Trump administration’s impending tariffs.
Consumer spending - which makes up more than two-thirds of U.S. economic activity - also has slowed significantly.
The latest data showed spending increased just 0.5% in Q1, down from the previous 1.2% estimate, and marking the weakest pace in over four years.
Wholesale inventories also declined, with overall stockpiles falling 0.3% to $905.4 billion in May.
Durable goods orders jumped 16% in May to $343.59 billion, rebounding from April’s 6.6% drop, driven by a 48% surge in transportation equipment and a 231% spike in nondefense aircraft orders, as Boeing recorded its best month since 2014 with 303 orders.
On the housing front, pending home sales offered a rare bright spot. The National Association of Realtors (NAR) reported a 1.8% increase in its pending home sales index to 72.6 in May, with gains across all regions. Year-on-year, pending sales rose 1.1%.
"Consistent job gains and rising wages are modestly helping the housing market," said Lawrence Yun, chief economist at the NAR. "However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains."
Trade data also painted a troubling picture. The U.S. merchandise trade deficit widened to US$96.6 billion in May, up sharply from April’s revised $87.0 billion.
Exports fell 5.2% month-over-month to $179.2 billion, while imports remained flat at $275.8 billion.
Industrial supplies and consumer goods were among the import categories that softened after the earlier surge in demand.
