U.S. GDP Grows 2% in Q1 2026, Rebounds from Q4

The U.S. economy expanded at a 2 percent annualized rate in the first quarter of 2026, according to the Commerce Department, rebounding from a sluggish 0.5 percent pace in the final three months of 2025 following a 43-day federal government shutdown the previous fall. The report, released Thursday, covers January through March and marks the first of three estimates, though the outlook faces uncertainty from an ongoing conflict in Iran.

Government spending and investment rose at a 9.3 percent annual rate, contributing more than half a percentage point to overall growth after subtracting 1.16 percentage points the prior quarter. Consumer spending, which makes up 70 percent of economic activity, slowed to a 1.6 percent increase from 1.9 percent late last year, with outlays on goods such as food and clothing dipping slightly and services growth easing. Business investment climbed 8.7 percent, likely boosted by artificial intelligence initiatives. Nonresidential investment excluding housing surged 10.4 percent, the largest gain in nearly three years.

Offsetting some gains, residential investment dropped 8 percent, the fifth consecutive quarterly decline and the steepest since late...