As U.S economy shrinks in Q1, the buzz word around town is recession; here's what experts are saying

The United States economy contracted during the first quarter of 2025, warning that a moderate recession could already have started or could soon be beginning, a report said.

Economic Contraction Raises Red Flags

The initial estimate by the Commerce Department revealed that GDP declined at a 0.3% rate annually during January through March, from a 2.4% gain in the fourth quarter last year, Reuters reported.

While, a Reuters survey of economists reported that economists had predicted GDP would expand at a 0.3% rate over this period, as per the report. The Reuters survey preceded data that showed the goods trade deficit surged to an all-time high in March on record imports, prompting a sharp downward revision of GDP forecasts, reported Reuters.

Experts Predict a Possible Recession

Chief market economist at Spartan Capital Securities, Peter Cardillo said, “The economy has shown negative growth, which means that we are probably already in a mild recession, or we're about to enter a mild recession," quoted Reuters.

While, Jamie Cox Managing Partner, Harris Financial Group, said, "I'm not surprised the headline GDP print wasn't worse, given the surge in imports. Underneath, however, real final demand remains super strong. Those who underestimate the US consumer, do so at their own peril," as quoted in the report.

Stock Market and Treasury Yields React

After the GDP estimate was announced, the S&P 500 emini futures extended to a 1.27% loss, pointing to a weak open on Wall Street, the US Treasury 10-year yield moved to 4.1946% and the two-year yield rose to 3.658% and the dollar index turned 0.21% lower, reported Reuters.

Tariff Policies Add to Uncertainty

Peter Andersen, founder Of Andersen Capital Management, pointed out that, "There shouldn't be a surprise, but the market is acting as if it is a surprise. This period where tariffs are trying to be negotiated and acknowledged by the market makes things extremely difficult to model, predict, etc. When the market cannot make a reasonable prediction, it tends to turn to the pessimistic interpretation of things," as quoted in the report.

FAQs

What does the GDP contraction mean for the US economy?
A contraction in GDP indicates a slowdown in economic activity and indicated a possible recession or a sign that the economy is already in one.

How much did the US GDP shrink?
The US GDP shrank by 0.3% annualized during the first quarter of 2025, as per Reuters.