Source : NEW INDIAN EXPRESS NEWS
WASHINGTON: The U.S. economy shrank at an annual rate of 0.3% in the first quarter of 2025, marking the first contraction in three years. Economists largely blame President Donald Trump’s trade policies,particularly his aggressive tariffs, for disrupting business activity.
A major drag came from a 41% surge in imports — the fastest pace since 2020 — as businesses rushed to bring in foreign goods before new tariffs took effect. That surge alone shaved 5 percentage points off GDP growth.
At the same time, consumer spending slowed sharply to 1.8% (down from 4% in Q4 2024), and federal government spending dropped 5.1%.
This downturn follows a 2.4% expansion in the last quarter of 2024. Analysts had expected a modest 0.8% gain, but many were bracing for a potential decline. Financial markets reacted quickly: the Dow fell 400 points, while the S&P 500 dropped 1.5% and the Nasdaq fell 2%.
However, not all indicators were negative. A key measure of the economy’s underlying strength — which excludes trade, inventory changes, and government spending — grew at a healthy 3% annual rate, slightly up from 2.9% in the previous quarter.
Still, concerns are mounting. Core inflation rose to 3.5%, well above the Federal Reserve’s 2% target. The Fed now faces a difficult choice: cut interest rates to support growth, or keep them high to fight inflation. Ryan Sweet of Oxford Economics said the economy appears to be entering a period of stagflation — where growth stagnates while inflation remains high.
SOURCE :- NEW INDIAN EXPRESS
