While U.S. real gross domestic product (GDP) contracted in the first quarter of 2025, gross private domestic investment soared during the same period.
U.S. real GDP decreased at a rate of 0.3% in the first quarter of 2025, marking the first quarterly contraction since 2022, according to a report released on Wednesday by the Bureau of Economic Analysis (BEA). Still, private domestic investment in the U.S. notably surged during the first quarter of 2025, increasing 21.9%, the BEA reported.
The first quarter’s increase in private investment — which marked the highest rate since late 2021 — may have been partially driven by a 22.5% increase in business spending on equipment, according to the BEA.
“The Q1 GDP report suggests that the U.S. economy is slowing, not that it is contracting,” American Institute for Economic Research (AIER) Senior Research Fellow Paul Mueller told the Daily Caller News Foundation. “There was reasonable growth in consumption and investment. The negative number was due primarily to a big increase in imports in anticipation of the tariffs. A silver lining is that government spending was not artificially stimulating this quarter’s numbers the way it has every quarter for the past four years.” (RELATED: Amazon Reportedly Floats Plan To Show Tariff Price Increases To Shoppers — Karoline Leavitt Calls It ‘Hostile’ Move)
“A surge in private investment — 22% in the last quarter. That’s not what firms do when they’re concerned about the economic outlook. That’s not what firms do when the economy is shrinking,” says @CEA47 Chair @SteveMiran.
“That’s what firms do when they believe in the future.” pic.twitter.com/GaZiyo89Qj
— Rapid Response 47 (@RapidResponse47) April 30, 2025
The first quarter GDP downturn comes after the U.S. economy grew by 2.4% in the fourth quarter of 2024, after increasing 3.1% in the third quarter of 2024, according to the BEA. Stocks fell on Wednesday after the GDP report was released.
“Investment normally is thought of like if you build a home, that’s investment, or if you build a new factory and fill it with equipment, that’s an example of investment,” Richard Stern, an economist at the Heritage Foundation, told the DCNF. “However, investment also includes inventory changes. Obviously, inventory is normally a really small percentage of what is going on [in GDP reports], but in this quarter, inventory is a crap ton of what’s going on because people are flooding in imports and then putting them into warehouses.”
President Donald Trump has been moving to revamp America’s trade sector as part of his “America First” agenda, including by announcing massive tariffs on imported goods from a variety of foreign countries in April, which sent shockwaves through global markets.
“Whether U.S. GDP contracts in Q2 depends almost entirely on whether the Trump administration can nail down its tariff policies at a lower, stable rate,” Mueller told the DCNF. “If they don’t, the economy will likely contract. If they do, it will likely expand significantly.”
“Private investment is likely up due to expectations of deregulation, lower energy costs, and lower taxes,” Mueller added. “The threat of tariffs may have some minor impact too.”
A slate of businesses and foreign countries have pledged to invest more money in the U.S. over the next several years following Trump’s return to the Oval Office.
Trump blamed former President Joe Biden for handing him a bad economy in a Wednesday Truth Social post, claiming that the U.S. economy will “boom, but we have to get rid of the Biden ‘Overhang.’”
“This is Biden’s Stock Market, not Trump’s,” Trump wrote. “I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
Recent polling has shown that many Americans disapprove of Trump’s economic policies. A NPR/PBS News/Marist Poll survey published Tuesday showed that just 39% of Americans said they approved of the president’s approach to handling the economy during his second term.
Relatedly, A 55% majority of Americans said that Trump’s actions on tariffs have been bad policy, with 28% saying they were good policy, and 17% saying they have been neither, according to a CNN poll conducted by SSRS released on Monday.
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