Government policy and uncertainty around tariffs have distorted U.S. economic data, clouding the economy’s true state as the second quarter concludes. Businesses front-loaded imports before April’s tariff announcements, which skewed first-quarter GDP, now revised down to -0.5%. Those imports, calculated into GDP immediately upon arrival in the U.S., lowered first-quarter growth by nearly five percentage points. Yet, many of those goods didn’t count toward inventory growth in the GDP calculation since that requires businesses to have physically received the goods. This timing mismatch over quarter-end suggests first-quarter economic activity was likely much stronger than the GDP contraction implies.
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