The economy contracted at a 0.2% annual rate in the first quarter of 2025, the Bureau of Economic Analysis said Thursday in a revision to its estimate of GDP.
A preliminary report from the agency found that the economy contracted at a 0.3% rate in the quarter, so Thursday’s report represented an upward revision in the growth rate of a tenth of a percentage point.
While it is a slight improvement, the new report highlights the challenges the economy and President Donald Trump face in the coming months. They also raise concerns about the potential for a recession.
This is the second of three GDP estimates the BEA has published for the first quarter as more data are analyzed. The final report will come in late June.
The decline in GDP is a notable shift from the final quarter of last year, which saw economic output increase by a solid 2.4%. It also marks the only time, other than one quarter in 2022, that the economy has contracted since the pandemic.
Trump’s early tenure has been marked by his aggressive tariff policy. The imposition of major tariffs on countries worldwide in April led to a major decline in stock prices and rising fears of recession. In recent weeks, though, the stock market has risen as Trump has backed off some of the tariffs and attempted to strike trade deals.
It is complicated to gauge when recessions begin and end, but those in government and most economists look to the National Bureau of Economic Research, a private group, to declare one.
NBER defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” although there is a historical precedent of labeling two consecutive quarters of negative economic growth recessionary. The periods feature rising unemployment.
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The Federal Reserve has a complicated job right now. It has kept interest rates higher to quash inflation, but if GDP continues to soften, it might be forced to lower rates to help stave off a recession.
Other economic data, though, have been more encouraging. For instance, inflation as gauged by the consumer price index rose only 2.3% over the past year. That is coming within spitting distance of the Fed’s 2% level.
