Despite a headline 0.3% drop in first-quarter GDP, Larry Kudlow is calling foul on the doomsaying. According to the former Trump economic adviser, the real story of the U.S. economy in 2025 isn’t stagnation—it’s acceleration.
Kudlow took to Fox Business this week to dismantle what he calls the “liberal press and Wall Street obsession” with one weak data point. He says the negative GDP figure masks a robust economic expansion already underway, driven by President Trump’s early policy wins and surging private sector confidence.
“The media are screaming recession,” Kudlow said. “But when you strip out temporary distortions like inventory swings and surging imports, the actual growth rate is closer to 3 percent.”
Kudlow cited a lesser-known but crucial metric called “core GDP,” officially known as real final sales to private domestic purchasers. This measure excludes volatile factors like government spending, trade imbalances, and inventory changes. In the first quarter of 2025, it grew at an annualized pace of about 3 percent.
“This is the heart of the economy—consumer spending and private investment,” Kudlow explained. “It’s where the action is, and it’s booming.”
The Wall Street veteran says a surge in imports, which technically drag down GDP in government accounting, is misleading economists. In reality, Kudlow argues, businesses are stocking up now to get ahead of President Trump’s expanding tariffs on foreign goods—especially from China.
“It’s a sign of confidence in future demand, not a slowdown,” he said.
One of the most promising signs, Kudlow added, is the explosion in business investment. Capital expenditures surged nearly 10 percent last quarter, with equipment and machinery purchases jumping a staggering 22.5 percent.
“Those are investments that lead to productivity, wage growth, and long-term job creation,” Kudlow said. “That’s what you expect when companies see pro-growth policy on the horizon.”
Much of this investment boom, Kudlow believes, is in anticipation of Trump’s upcoming tax reform plan. The proposal includes 100% expensing of business investments, lower taxes on domestic production, and retroactive benefits dating back to Inauguration Day.
According to Kudlow, businesses are moving now to take advantage of the changes.
“They’re front-running the tax cuts—and reshoring jobs and capital while they do it,” he said.
Kudlow also emphasized the inflation picture as a major economic tailwind. The Federal Reserve’s preferred inflation gauge—the PCE index—was flat in March, and core inflation showed zero growth. Meanwhile, the consumer price index actually declined by 0.1%.
“This sets up a case for the Fed to cut rates,” Kudlow said. “You’re looking at low inflation and strong growth—a golden combination.”
The economist went a step further, accusing the Commerce Department’s GDP number-crunchers of a statistical fumble. He noted that while imports jumped by $333 billion last quarter, inventories only rose $140 billion—leaving a $200 billion gap in the data.
“Where did all those imports go?” he asked. “If you add that back into the GDP calculation, the economy isn’t contracting at all. It’s growing by 3.2 percent.”
Kudlow’s bottom line is that the Trump economy isn’t slipping—it’s revving up. He believes the full impact of Trump’s tax cuts, regulatory rollbacks, and trade strategy will be felt in the second half of the year and beyond.
“This isn’t a recession—it’s a runway,” Kudlow said. “We’re about to take off. And if the media stopped looking in the rearview mirror, they’d see what’s coming.”
As recession chatter grows louder in D.C. and on Wall Street, Trump’s inner circle is sending a clear signal: don’t trust the headlines—trust the fundamentals. With inflation cooling, investment surging, and consumer spending holding strong, they argue, the real economy is just getting warmed up.
