U.S. economy shrinks for the first time in 3 years

The economy of the United States has shrunk in the latest Q1 fiscal report by the U.S. Bureau of Economic Analysis.

A factory in the United States.

The report for quarter 1 showed that the nation's gross domestic product (nominal) fell by 0.3%, much lower from 0.2% increase most economists anticipated. In quarter 4 of 2024, the economy rose by 2.4%, a very healthy level for the economy.

This statistic is dangerous for future prospects of the economy because it marked the first period of negative GDP growth since quarter 1 of 2022, exactly three years ago. Even worse, if the economy continues in its bearish trajectory for quarter 2 of 2025, the U.S. economy would officially be labeled as a recession, the first since the 2020 COVID-19 pandemic.

In addition, the cost of common products (e.g. groceries) was shown to have increased as the total expenditures of said products rose 3.5%, up from the 3.2% that was expected by many economists.

In the first quarter of 2025, the U.S. presided over large increases in tariffs, mostly "reciprocal," and the transfer of global trade away from the United States as high tariff rates prevent international corporations from facilitating free trade with the leader of the west; in addition, many companies in the U.S. have preemptively laid off employees and cut spending in preparation for the implementation of these tariffs. As a result, the national GDP fell as both businesses and consumers alike suffered.

Stocks have sank by beyond 1% in response to this news development in the pre-market Wednesday.