GDP
The U.S. economy contracted at a 0.3% annual rate in Q1 2025, according to preliminary 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 41.3% annual rate, contributing to a record trade deficit and subtracting 4.83 percentage points from GDP. Much of that was stockpiled, with inventories adding 2.25 percentage points to growth.
More relevant for restaurants, consumer spending slowed notably. Personal consumption expenditures rose just 1.8% in Q1, down from 4.0% in Q4 and the softest pace in nearly two years. Durable goods spending fell 3.4%, weighed down by motor vehicles and parts, which alone shaved 0.26 percentage points from growth. Service-sector spending also moderated, with growth slowing from 3.0% to 2.4%, and foodservices and accommodations subtracting 0.11 percentage points from GDP, suggesting more cautious dining behavior early in the year.
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 unsettled same-store sales and overall traffic.
Government spending was another drag. Federal outlays fell 5.1% at an annual rate, cutting 0.33 points from GDP. State and local spending rose just 0.8%—its slowest pace since Q2 2022—adding a modest 0.08 points.
Still, there were some signs of resilience. Consumer spending and fixed investment—also known as domestic demand—together contributed 2.55 points to growth, growing 3.0% at the annual rate in the first quarter. Business investment jumped 7.8%, driven by gains in equipment and intellectual property products.
Looking ahead, uncertainty looms large—particularly on the policy front. The lack of clarity is making consumers and businesses more cautious, suppressing both discretionary purchases and dining activity. While Q1 was distorted by tariff-related stockpiling, Q2 could bring the opposite effect: falling imports and inventory drawdowns. Some early spending may have also pulled demand forward, suggesting additional softness ahead. Current forecasts peg annualized GDP growth at just 0.7% for 2025, with persistent headwinds keeping the outlook clouded. Policy clarity could help unlock stronger performance, but for now, anxiety is weighing on economic momentum.
