GDP
The U.S. economy contracted at a 0.2% annual rate in Q1 2025, according to newly revised data—marking the first decline since Q1 2022 and a sharp pullback from 2.4% growth in Q4 2024. That said, the data are volatile, distorted by consumers and businesses front-loading purchases ahead of anticipated tariff increases. Imports surged at a 42.6% annual rate, contributing to a record trade deficit and subtracting 4.90 percentage points from GDP. Much of that was stockpiled, with inventories adding 2.64 percentage points to growth.
More relevant for restaurants, consumer spending slowed notably. Personal consumption expenditures rose just 1.2% in Q1, down from 4.0% in Q4 and the softest pace in nearly two years. Durable goods spending fell 3.8%, weighed down by motor vehicles and parts, which alone shaved 0.30 percentage points from growth. Service-sector spending also moderated, with growth slowing from 3.0% to 1.7%, and foodservices and accommodations subtracting 0.04 percentage points from GDP, suggesting cautious dining behavior in the early months of 2025.
For restaurant and foodservice operators, this means, that while consumers will continue to prioritize spending on food away from home, the amount and frequency may continue to moderate. This is already playing out in mixed same-store sales and overall traffic data.
Government spending was another drag. Federal outlays fell 4.6% at an annual rate, cutting 0.30 points from GDP. State and local spending rose 1.7%—its slowest pace since Q2 2022—adding 0.18 points to top-line GDP growth.
Looking ahead, uncertainty looms—particularly on the policy front—prompting caution among both consumers and businesses and dampening discretionary spending, including dining. While Q1 was skewed by tariff-driven stockpiling, Q2 may show the reverse: reduced imports and inventory drawdowns. Some early purchases may also have pulled demand forward, setting the stage for additional softness.
Current forecasts call for annualized GDP growth of 1.4% in 2025, though downside risks keep the outlook clouded. Greater policy clarity could help unlock stronger economic performance, but for now, anxiety continues to weigh on momentum. Even so, the U.S. economy has shown surprising resilience, and with fewer obstacles, consumer and business spending could help stave off a more pronounced slowdown.
