U.S. economic growth contracted by -0.20% QoQ in the second estimate for Q1 2025, down from 2.40% QoQ in Q4 2024, as released by the US Bureau of Economic Analysis, and slightly better than market expectations of -0.3% QoQ contraction. It aligns with the slowdown in general inflation indicators, specifically the Personal Consumption Expenditure (PCE), which decreased to 2.10% year-over-year (YoY) in April 2025 from 2.30% YoY in March 2025. Meanwhile, the unemployment rate in May 2025 is expected by market consensus to remain stable at 4.2%, unchanged for two consecutive months since March 2025 (Figure 1).

U.S. GDP growth was driven by personal consumption expenditure, which fell to 0.8% QoQ from 2.7% QoQ in Q4 2024, representing 69.4% of total GDP (Figure 2). Personal consumption value increased by 1.2% QoQ to US$16.3 trillion, supported by increased spending on clothing and footwear. Other expenditures showed domestic investment growing at the highest rate of 24.4%QoQ. At the same time, government spending slowed by 0.7% QoQ due to President Donald Trump’s policy of maintaining efficient government operations overseen by the Department of Government Efficiency (DOGE). Net exports showed the highest slowdown at 30.9% QoQ due to rising import values, as goods and services were not produced domestically.