Is the U.S. in a Recession in 2025? GDP Slips as Economic Uncertainty Grows

By Evans Momodu, updated 21:46

The U.S. economy shrank in Q1 2025, sparking recession fears despite mixed data. Inflation is rising, consumer spending is slowing, and the economic outlook remains shaky.

The U.S. economy is showing signs of strain — but does that mean we’re officially in a recession?

Technically, not yet. But the sentiment on the ground and in the markets is increasingly pessimistic. On April 30, new government data revealed that gross domestic product (GDP) contracted by 0.3% in the first quarter of 2025 — the first decline in economic output in three years, and a sharp contrast to the 2.4% growth recorded in Q4 2024.

While not a textbook recession, this downturn signals a major shift. And as any seasoned observer will tell you: in economics, the vibe often leads the reality.

The 0.3% contraction surprised economists and raised eyebrows across Wall Street. It reflects the growing unease around President Donald Trump's trade and tariff policies, which have already begun to disrupt U.S. supply chains. His early 2025 tariffs on imports from Mexico and Canada, coupled with the anticipation of his broader "Liberation Day" tariff rollout in April, have sparked uncertainty.

Consumer spending — the backbone of the U.S. economy — grew just 1.8%, a steep drop from 4% in the previous quarter. According to economist Justin Wolfers, this makes for a “moderate” quarter — not a recession, but far from healthy growth.

Meanwhile, inflation is once again rising. The Federal Reserve’s Personal Consumption Expenditures (PCE) price index climbed to 3.6% annualised in Q1, compared to 2.4% in Q4. The monthly PCE report showed prices up 2.3% year-over-year in March, but relatively flat month-over-month.

Federal spending took a sharp dive — from a 4% growth rate at the end of the Biden administration to a 5.1% contraction under Trump. That may align with some ideological goals, but it undeniably drags on the economy.

And if public sentiment is any indicator, things aren't looking good. Recession fears have intensified, and as some analysts note, economic downturns can materialise when people simply expect them to. Confidence — or lack thereof — plays a critical role in business investment and consumer behaviour.

While we may not meet the formal criteria for a recession just yet, the signs are aligning: contracting GDP, slowing consumer spending, rising inflation, and declining federal outlays. The vibes, in other words, are very recessionary.
Source: CNN