12:50 PM EDT, 04/30/2025 (MT Newswires) -- The US economy contracted in the March quarter, representing the first quarterly decline in three years, with analysts expecting tariffs to further slow activity down later in the year.

Real gross domestic product in the world's largest economy decreased at an annual rate of 0.3% in the first quarter, representing the first drop since the first quarter of 2022, according to an advance estimate released Wednesday by the Bureau of Economic Analysis. The consensus was for a 0.2% decline in a survey compiled by Bloomberg.

GDP grew 2.4% in the fourth quarter. The first-quarter contraction mainly reflected higher imports and a fall in government spending, the BEA said. Consumer spending growth slowed to 1.8% from the fourth quarter's 4% pace.

"The US economy's modest contraction in (the first quarter) was mostly due to temporary issues, but the trade war will weigh this year," BMO Capital Markets Senior Economist Sal Guatieri said in a note. "Weaker exports and intense uncertainty will hold the economy back in the next couple of quarters."

Earlier in April, US President Donald Trump announced sweeping new tariffs on imports, including from China. Trump later declared a 90-day pause on certain duties for non-retaliating countries, though Washington and Beijing have been in a deadlock.

As a measure of inflation, the personal consumption expenditures price index advanced by 3.6% in the first quarter, compared with a 2.4% rise the quarter prior, the BEA's data showed. The core PCE index, which is the Federal Reserve's preferred inflation metric and excludes volatile food and energy prices, accelerated to 3.5% from 2.6%.

In a separate report, the BEA said PCE rose 0.7% in March following a 0.5% gain the month before, surpassing the Bloomberg-polled consensus for a 0.6% increase. Goods spending rose 0.9% last month, buoyed by an acceleration in durables. Services spending growth sped up to 0.6% from 0.5% on a monthly basis.

"March's strong gain in personal spending was helped by front-loading of auto sales ahead of tariffs, but even excluding autos, spending growth remained solid," Oxford Economics Deputy Chief US Economist Michael Pearce said in remarks emailed to MT Newswires. "The early signs for April remain encouraging, though we expect a hangover in spending on autos as the front-loading fades and anticipate spending will slow more sharply as the real income shock from tariffs unfolds toward midyear."

On Tuesday, Trump signed signed a pair of orders to offer some relief to US automakers from his recently announced 25% vehicle and auto parts tariffs.

The annual headline PCE price index decelerated to 2.3% in March from February's 2.7% increase, compared with the Street's forecast for 2.2%. Monthly inflation was flat, in line with estimates, after a 0.4% rise in February.

The Fed's preferred core measure cooled down to 2.6% in March from the previous month's 3% growth, meeting the Bloomberg consensus. Sequentially, the core measure was flat, compared with a 0.1% increase estimated by analysts.