The US economy contracted by an annualised 0.3 per cent over the first quarter, as companies in the world’s largest economy responded to Donald Trump’s trade war by stockpiling imports.
The slide in GDP for the period was worse than economists’ most recent forecasts and compared with the 2.4 per cent rate recorded for the fourth quarter.
The fall was largely the result of US companies’ rush to accumulate inventory ahead of Trump’s sweeping tariffs, with US Census Bureau data on Tuesday showing the trade deficit for goods hitting a record high in March.
The difference between imports and exports is an important factor in calculating GDP, which also measures domestic consumption, investment and government spending.
Stock futures dropped and bond yields rose slightly following the data. The two-year Treasury yield, which moves with interest rate expectations, was up 0.01 percentage points to 3.66 per cent.
There was no significant shift in interest rate cut expectations following the data, with traders in the futures market still pricing in roughly four cuts this year.
Several Wall Street economists revised their estimates for first-quarter growth downwards after Tuesday’s goods trade figures were published.
The Bureau of Economic Analysis, which produced Wednesday’s GDP figures, added that the fall in output for the first quarter also reflected a decline in government spending.
It said that such changes were partly, but not wholly, offset by increases in investment, consumer spending and exports.
Trump’s trade war is expected to lead to slower growth over the second half of this year, with higher prices weighing on consumption.
The IMF said last week that US GDP would expand by 1.8 per cent this year – down from its January estimate of 2.7 per cent. Many private sector forecasters predict no growth at all. – Copyright The Financial Times Limited 2025
