[HN Gopher] US economy shrank 0.5% in the first quarter, worse t...
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US economy shrank 0.5% in the first quarter, worse than earlier
estimates
Author : Aloisius
Score : 256 points
Date : 2025-06-26 19:23 UTC (3 hours ago)
(HTM) web link (apnews.com)
(TXT) w3m dump (apnews.com)
| Aloisius wrote:
| I'm a bit confused about the bit about the "Imports expanded
| 37.9%, fastest since 2020, and pushed GDP down by nearly 4.7
| percentage points" bit.
|
| Presumably when they calculated GDP previously, they hadn't seen
| quite as much imports, but had seen higher spending, thus they
| misattributed some of it to domestic products rather than
| imports, though I'm a bit confused as to how they underestimated
| imports given everything is declared. Perhaps some changes in the
| price index?
|
| Though other articles talk about the expected GDP next quarter
| being higher because they don't expect a surge of imports to
| continue, which makes no sense to me unless one assumes spending
| remains the same with or without imports.
| outside1234 wrote:
| My theory would be that a lot of companies imported a ton in
| the first quarter knowing that tariffs were coming.
| WaxProlix wrote:
| Sure, but GP's point is that that level of spending likely
| won't continue now that the (forecasted) demand has been met.
| Espressosaurus wrote:
| My company did that. Along with rushed some deliveries that
| weren't 100% ready to avoid the sudden spike in tariffs.
|
| I also personally did that for expensive gear I was otherwise
| planning on waiting on. And now I'm not going to be buying
| that over the next 2-5 years like I was originally planning.
|
| It's a big bolus of spending that will not be replicated in
| the future.
| don_neufeld wrote:
| Yup, did the same, ton of new hardware.
|
| Last week I was looking at a proposal from a supplier
| that's got a ~8K "tariff" line on it and thinking...
| y'know, I can wait on that project.
| iamtheworstdev wrote:
| stolen from investopedia: The GDP formula is commonly expressed
| as GDP = C + I + G + (X - M), where C is consumer spending, I
| is business investment, G is government spending, and (X - M)
| represents net exports (exports minus imports). This formula
| helps measure the total economic output of a country during a
| specific period.
|
| Our tariffs are tampering with the intelligent monitoring of
| GDP growth. When the USA expanded tariffs to 155% with China it
| was effectively an embargo, so imports went away (but exports
| didn't) and our GDP looked amazing. When the tariffs were
| brought back to previous rates of 55%, companies bought every
| import they could (or had them released from bonded warehouses)
| which has pumped the GDP in the other direction. And it'll
| likely be the same situation next month because Chinese ports
| are seeing record numbers as US companies try to buy every
| piece of inventory they can before these tariffs go back up.
| axus wrote:
| That seems very strange to me that GDP is the same, when
| import:export is 4:3 or 3:2, but explains why someone would
| care more about the difference than the absolute values.
| yread wrote:
| If you import something and immediately export it the ratio
| changes but the difference doesnt
| notahacker wrote:
| They're accounting identities, not casual relationships.
| Exports are stuff that's part of domestic product (but not
| consumed domestically) so get added. Imports are stuff
| domestic consumers get the benefit of but aren't actually
| produced domestically, hence the direction of the signs in
| the accounting identity. The 4:3 ratio is consistent with
| an economy which might be more open than a 3:2 one, but it
| doesn't actually have a higher GDP unless there's higher
| consumption or investment or government spending as a
| result of the extra trade.
|
| The key part is that nobody should care about any values or
| ratios in isolation or impute causality that isn't there.
| Otherwise people start believing that doing crazy stuff to
| shrink a trade deficit results in higher GDP, as opposed to
| lower C+I+G. And when those people are sufficiently
| stubborn and sufficiently powerful, you get _$economy
| shrank 0.5% in the first quarter_ headlines...
| m-hodges wrote:
| Chris Clarke has a great Short on this:
| https://www.youtube.com/shorts/UrsRoHmXCug
| ginko wrote:
| In a non-terrible format:
| https://www.youtube.com/watch?v=UrsRoHmXCug
| dylan604 wrote:
| how is that better? the selected background color is not
| better than black which is what most players will do when
| forced to a landscape player
| ginko wrote:
| You can pause and forward the video and scrolling doesn't
| change to another video.
| hayst4ck wrote:
| One of the most upsetting things about our current state of
| governance is gamed metrics and lack of a national metrics
| "dashboard."
|
| Metrics are gamed as marketing tools rather than assessment
| tools. There's a clear conflict of interest in the government
| presenting the metrics that it says to judge them by.
|
| Unemployment is another gamed metric. If you want to get a
| sense of unemployment, a graph of % employed tells you more
| than some gamed number like "unemployment" since
| "unemployment" is a direct measure of political success.
|
| Consumer spending/GDP are also directly used to measure
| political success, and a metric like "aggregate
| Visa/Mastercard purchases" is going to give a much better
| sense of how much people are spending.
|
| During COVID, all cause mortality is a superior metric than
| COVID attributed deaths because any death attributed to COVID
| represented a failure of public health policy. We even saw
| direct attacks on public health monitoring in Florida.
|
| It seems like the only ways to combat this are either states
| presenting their own metrics to imply national trends based
| on their own. I definitely wonder what kind of information we
| could get that is accurate and not gamed to create our own
| dashboards. Geohot's use of national energy consumption to
| estimate national productivity was sharp and the type of
| thing I wish journalists would do.
| rrrrrrrrrrrryan wrote:
| Politicians brag about the U-3 unemployment (that they've
| gamed), but actual economists look at U-6 (unless they need
| to do a comparison going back a century, when U-6 didn't
| yet exist).
|
| During covid politicians bragged about covid attributed
| deaths, while public health experts were discussing all
| cause mortality.
|
| This is the case everywhere. Quality metrics are absolutely
| out there - you just have to give enough of a shit to look
| at them.
| randomNumber7 wrote:
| So you are in favor of temporally changing the GDP formula
| to fit your mindset better?
| czhu12 wrote:
| From what I understand from Econ 101, this is not true. The
| only reason you subtract imports is to avoid double counting
| because presumably the import was done by C, G or I.
|
| The point of subtracting imports is so that it doesn't count
| as domestic production, and effectively zeros out the portion
| of C + G + I that was not produced domestically, but thats
| independent of how much is in exports.
| digitalPhonix wrote:
| That's true (analogy - you can find out how much the
| clothes you're wearing weigh by weighing each piece
| individually or weighing yourself wearing them and
| subtracting your weight).
|
| But you can't change the process mid way through your
| measurement. We don't have a way of measuring "consumption
| of domestic products" so we just measure consumption and
| subtract the imports afterwards.
|
| X-M is an accounting trick, but when you're using this
| model you have to stick with it.
|
| The idea that imports were deferred causes this accounting
| trick to show its weakness. (Presumably, looking at the
| data for all of 2025 when it's available will "low pass"
| the deferred imports)
| Aloisius wrote:
| I'm not sure I understand. What process is changing? The
| "accounting trick" doesn't stop working.
|
| Let's try a very simple example of buying all our
| inventory in one quarter and selling it in another - what
| is supposedly behind our GDP woes.
|
| Let's say in Q1, the only spending was on $1 trillion of
| imports into private inventories, thus: I=$1 trillion,
| C=$0, G=$0, X=$0, M=$1 trillion. That gives us a GDP of
| $0.
|
| Next quarter, flush with product there's no need to
| import anymore and the entire inventory is somehow sold
| domestically, thus: I=-$1 trillion, C=$1 trillion, G=$0,
| X=$0, M=$0. That gives us again, a GDP of $0.
|
| Yet articles claim that the GDP in Q2 would be higher due
| to the drop in imports and was reduced in Q1 due to an
| increase in imports.
| dylan604 wrote:
| > (analogy - you can find out how much the clothes you're
| wearing weigh by weighing each piece individually or
| weighing yourself wearing them and subtracting your
| weight)
|
| damn, my clothes are heavy, because I _know_ how much I
| weigh.
| gowld wrote:
| Quarterly GDP, since it's measured via global approximation,
| isn't meaningful in quarters when the economy is rapidly
| changing. The numbers only make sense over time periods where
| behavior is relatively steady.
| RC_ITR wrote:
| Preamble: GDP, is a bit of a synthetic metric.
|
| As you point out, there's _no_ purchase level data about what
| 's imported vs. not.
|
| The way this is handled is that _this quarter 's_ imports are
| set against _this quarter 's_ consumption - basically the
| method assumes the import/domestic mix of business inventories
| stays the same (true enough in the long run, very incorrect in
| short term shocks).
|
| That's why _extremely disingenuously_ the AP says:
|
| >Trade deficits reduce GDP. But that's just a matter of
| mathematics. GDP is supposed to count only what's produced
| domestically, not stuff that comes in from abroad. So imports
| -- which show up in the GDP report as consumer spending or
| business investment -- have to be subtracted out to keep them
| from artificially inflating domestic production.
|
| Answer: What happened here[1] is that the BLS makes a bunch of
| assumptions to get data out in time (preliminary figures based
| on historical seasonal trends, etc.) but this quarter, their
| assumptions about consumer spend were _far_ too aggressive.
|
| It happens all the time, especially in strange times like 1Q
| was, but there's also career/political incentive to be
| aggressive on the advanced data, since that's what drives the
| big headlines.
|
| [1]https://www.bea.gov/system/files/gdp1q25-3rd-chart-02.png
| jfengel wrote:
| Spending did not keep up; if it had, the net effect on GDP
| would be zero.
|
| This is companies stocking up, and the items are in inventory.
| They will sell it over the next quarter or so, at which point
| the tariffs will really weigh.
| cchance wrote:
| I've heard this from a number of buyers for companies, that
| their companies have hugely held stockpiles, to avoid the
| tariff uncertainty in hope they get worked out before
| stockpiles run out... most of the ones i've talked to say its
| only gonna last a few months before shit really hits the fan
| Matticus_Rex wrote:
| In the quoted statement, they're reasoning from an accounting
| identity because they don't understand the underlying measure.
| There's a kernel of truth, but it's much more complicated than
| that.
|
| Imports are subtracted from the GDP calculation, BUT, that's
| only because they're _added_ in the equation as well as part of
| consumption /investment/government spending. So to capture only
| the domestic production, since it's hard to measure
| consumption/investment/government spending only on domestic
| inputs, you just measure them overall, add exports, and
| subtract imports.
|
| So people see that in the equation imports are literally
| subtracted as a variable, and reason that if imports go up $X,
| that means GDP literally goes down by that amount. In reality
| -- ignoring for a moment that we sometimes mismeasure
| consumption/investment/government spending, the net effect in
| the equation is 0.
|
| ON THE OTHER HAND, in one way part of the GDP drop here _is_
| because of imports. It 's not something you can cleanly
| calculate the way journalists often try to, because there's a
| lot we don't know, but picture this simplified example:
|
| I'm a factory owner, and my factory uses a lot of inputs that
| we import from China. We normally spend $50k/quarter on
| investment (maintenance, new machines, etc.). But next quarter
| my short-term cost of Chinese inputs may double. It may make
| sense for me to front-load imports ahead of tariffs and defer
| as much investment as possible. I can't do that forever, so
| eventually the money will show up in the equation more-or-less
| where it would have otherwise.
|
| And on top of that, there are a bunch of confounding factors.
| Over time, imports also make domestic production more
| efficient, so shifting to less-efficient US inputs (or simply
| paying the tariff) will slow the rate of overall growth. And
| some costs are passed on as higher prices, which reduces
| demand, and therefore reduces growth. And importing goods also
| means exporting dollars, which affects exchange rates, and
| therefore affects exports as well. It's all interconnected.
|
| Calling it out when they reason from an accounting identity is
| really important, because it's a lot of what drives the
| misconceptions of Trump's protectionist advisors -- they use
| the same reasoning in reverse to say that anything that reduces
| the trade deficit therefore increases GDP. But that's only true
| in an accounting sense! Reality takes more complex modeling,
| and has to account for all the interconnected pieces.
| ACow_Adonis wrote:
| See this article: Why do econ journalists keep making this
| basic mistake.
|
| https://www.noahpinion.blog/p/why-do-econ-journalists-keep-m...
|
| Source: am economist, and the writer of the blog is 100%
| correct.
|
| Reporting and commentary on GDP and economics stats is just
| generally bad.
| throwaway2087 wrote:
| "President Trump's America First Economic Agenda has created a
| BOOMING economy -- jobs are up, unemployment is down, wages are
| increasing, and inflation is dead. More than 139,000 good jobs
| were added to the private sector in May, all accounted for by
| American-born workers. Americans should continue to trust in
| President Trump, who continues to beat expectations." -- White
| House Press Secretary Karoline Leavitt
|
| /rofl
| piker wrote:
| None of those are negated by a lower GDP number to be fair.
| chrisco255 wrote:
| This GDP print is mostly statistical fluke from excessive
| imports ahead of tariffs, way too early to be dancing on
| graves.
| mdorazio wrote:
| The current White House press statements are often bullshit,
| but most of the above statement is at least directionally true.
| Unemployment is still at historically low levels and has been
| flat for a year. US Real Average Hourly Earnings _are_ up, and
| the latest CPI data shows a 12-month inflation rate of 2.4%
| (not seasonally adjusted).
| NaOH wrote:
| As a new account, it'd probably be best to familiarize yourself
| with the site guidelines. For example,
|
| > _Be kind. Don 't be snarky. Converse curiously; don't cross-
| examine. Edit out swipes._
|
| > _Omit internet tropes._
|
| > _Please don 't post shallow dismissals, especially of other
| people's work. A good critical comment teaches us something._
|
| https://news.ycombinator.com/newsguidelines.html
| throwaway5752 wrote:
| While I think this is borderline in terms of following
| guidelines, it is much more concerning that the comment
| accurately quoted the source:
| https://www.whitehouse.gov/articles/2025/06/trump-effect-
| hig...
|
| nickff: I agree it was borderline. My sentiment was closer to
| suggesting we look past tone to how shocking the content is.
| The human brain tries to normalize things, but a statement
| like this would have been unprecedented before 2016. People
| would have resigned or been fired, it would have been a
| scandal.
| nickff wrote:
| I think the comment you replied to was criticizing the
| "/rofl". These shallow reaction/dismissal comments really
| are turning this site into the hell-hole that Reddit
| already is.
| affinepplan wrote:
| Leavitt's statement doesn't deserve further scrutiny
| beyond shallow dismissal.
| nickff wrote:
| The top-level comment added nothing to the conversation
| that this site is supposed to be about. We are supposed
| to assume that commenters read thee article, and if they
| did, a LOL, ROFL, or WTF doesn't move the conversation
| forward.
| tzs wrote:
| The quote in the top-level comment from the White House
| is not in the article [1], so I'm having trouble
| understanding your point.
|
| [1] right now. It is possible it was in an earlier
| version of the article.
| op00to wrote:
| This whole thread adds nothing to the conversation.
|
| Downvote as you choose and move on. Maybe I ought to take
| my own advice.
| NaOH wrote:
| > _The most important principle on HN, though, is to make
| thoughtful comments. Thoughtful in both senses: civil and
| substantial._
|
| https://news.ycombinator.com/newswelcome.html
| micromacrofoot wrote:
| Are we considering propaganda work now?
| lcnPylGDnU4H9OF wrote:
| > especially
|
| The problem with shallow dismissals in general is that it
| is a low bar for a comment. The problem with shallow
| dismissals in the context of someone else's work is that
| it's invalidating something which should be celebrated.
| They're both problems for different reasons. A comment
| explaining why one thinks the quote is ridiculous is more
| substantive than simply laughing at it.
| mindslight wrote:
| > _A comment explaining why one thinks the quote is
| ridiculous is more substantive than simply laughing at
| it._
|
| The problem is if you do the work of analyzing the overt
| liars' statements, people will then pick on that for
| being too inflammatory. Never mind the downvotes from the
| true believers that are still gulping down the Kool-aid.
| IncreasePosts wrote:
| Realistically, it's not a new user, since they're making a
| throwaway. It's someone on the site that just didn't want
| this post associated with their main account.
| einrealist wrote:
| And if proven otherwise, it is "Biden's fault".
| bamboozled wrote:
| "It's the media's fault for reporting the numbers accurately" /s
| trhway wrote:
| Foundation of US economy is domestic consumption. The current
| administration has significantly increased taxes - in the form of
| tariffs - on that consumption. So, the results are and are going
| to be as expected by any economy textbook.
|
| Additional obvious effect of tariffs is introducing friction, to
| say the least, into supply chains, similar to how pandemics did
| at the beginning with about the same result - inflation and loss
| of productivity.
|
| I personally have no panic here though - during my quarter of
| century here i noticed that US economy is extremely resilient and
| can take a lot of hits and damage, can even get knocked down, yet
| nothing can get it knocked out, and it would always come back
| even more roaring. It is though very hard on those who gets the
| sharp end of stick here, i'd wish that the society would get a
| bit more empathetic to them.
| gotoeleven wrote:
| The hope, at least, is that the tariffs will encourage the
| creation of more, better, jobs in the US through re-shoring.
| This would, in theory, also increase domestic consumption
| though the time frame is longer.
| youngtaff wrote:
| It's not just tariffs that are the issue... quite a few people
| from other countries have stopped coming to the US and are
| avoiding buying US products where possible
| Waterluvian wrote:
| I've never seen this level of anti-American sentiment in Canada
| in my whole life.
|
| One thing I have my eye on is how hard consumer habits are to
| change. For example, American alcohol is simply gone from store
| shelves in Ontario. I can only imagine how much marketing work
| went up in the wind now that consumers have adapted. Returning
| the product to the market is probably not even the hard part.
| wnevets wrote:
| The "bad news is actually good news" post are gonna be wild.
| vaadu wrote:
| The tariffs didn't go into effect until Apr 2, that's Q2.
|
| But what can you expect from a propaganda outlet?
| mcphage wrote:
| What news source you do think is not a propaganda outlet?
| gcommer wrote:
| The article never claims tariffs going into effect caused the
| Q1 issues.
| ericyd wrote:
| If it weren't tragic it would be hilarious that Trump is the
| worst thing the US economy has seen since COVID.
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