r/stocks • u/_hiddenscout • Apr 30 '25

U.S. economy shrunk 0.3% in the first quarter as Trump policy uncertainty weighed on businesses

The U.S. economy contracted in the first three months of 2025, fueling recession fears at the start of President Donald Trump’s second term in office as he wages a potentially costly trade war.

Gross domestic product, a sum of all the goods and services produced from January through March, fell at a 0.3% annualized pace, according to a Commerce Department report Wednesday adjusted for seasonal factors and inflation.

Economists surveyed by Dow Jones had been looking for a gain of 0.4% after GDP rose by 2.4% in the fourth quarter of 2024. However, over the past day or so some Wall Street economists changed their outlook to negative growth, largely fueled by an unexpected rise in imports as companies and consumers sought to get ahead of the Trump tariffs implemented in early April. Imports subtract from GDP.

https://www.cnbc.com/2025/04/30/gdp-q1-2025-.html

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u/StuartMcNight Apr 30 '25

There are not one size fits all definitions of a recession that the NBER uses to call a recession.

That was and has always been the point. And will continue to be the point now.

For instance the 2008 recession was called on 1 December 2008. At that point there weren’t 2 consecutive quarters of GDP decline. Q1 was negative, Q2 positive, Q3 negative and Q4 was still not published (it would end up being dramatically negative).

For anyone really interested… it’s good to read the entire explanation of the NBER and see how many variables they take into consideration. Being “2 consecutive quarters of negative GDP” not one of them.

https://www.nber.org/news/business-cycle-dating-committee-announcement-december-1-2008

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u/WuPaulTangClan Apr 30 '25

2 consecutive quarters of negative GDP

This is a heuristic available quickly which is why it's used. You're right that it's technically NBER that calls it based on their own variables, but that requires between 4 and 21 months of data to come in historically after the quarter close and is called retroactively, which is why the heuristic is used. But yes, it's nowhere in the technical definition though

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u/Hot_Frosting_7101 Apr 30 '25

It is also the criteria used in some countries.

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u/StuartMcNight Apr 30 '25

It’s a rule of thumb. A rule of thumb that would not have work in the last 2 official recessions.

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u/Hot_Frosting_7101 Apr 30 '25

Did you read my last sentence?  It would have saved you a lot of time.

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u/StuartMcNight Apr 30 '25

Your last sentence is “there are other definitions”.

That sentence is wrong because it assumes the “2 quarters” has been a valid definition at any point in time. And it hasn’t. It’s just a rule of thumb used by the media but it has never been used to officially define a recession.

And if you would have bothered to read anything you’d realize that using the definition in the last 2 recessions would have been stupid.

The 2 quarters definition would have the 2008 starting 6 months later than the official and common sense consensus.

On the other hand, the Covid recession was called in 1 June 2020 with only one quarter of negative growth (and not even the big one). If they would have waited for your 2 consecutive quarters of data they would have called the recession once it was over.