The rebound followed a 0.5% expansion in late 2025, when a federal government shutdown weighed on output
The U.S. economy expanded at an annualized rate of 2.0% in the first quarter of 2026, rebounding from a 0.5% pace in the prior quarter, the Bureau of Economic Analysis said in an advance estimate.
Investment, exports, consumer spending, and government spending all contributed to growth in the January-through-March period, according to the BEA. Imports, which subtract from GDP, also rose.
The acceleration from the fourth quarter of 2025 reflected upturns in government spending and exports, along with stronger investment growth. Consumer spending decelerated compared with the prior quarter.
After the government shutdown caused federal outlays to pull 1.16 percentage points from fourth-quarter output — a hit not matched since early 1994, according to Reuters — federal spending staged a recovery in the January-through-March period. Household spending, which makes up roughly two-thirds of the economy, climbed at a 1.6% rate during the first three months of the year, according to Bloomberg. Demand for services drove that increase, with health care — including hospital, nursing home, and outpatient services — leading the way, the BEA said.
Equipment outlays by businesses jumped 10.4%, a rate not seen in nearly three years, with artificial intelligence buildout and data center construction cited as key drivers, according to Bloomberg. Within investment, gains in equipment and intellectual property products — particularly software and computers — were partly offset by declines in residential and nonresidential structures.
Real final sales to private domestic purchasers, a measure of underlying demand that strips out trade and inventories, rose 2.5%, up from 1.8% in the fourth quarter.
Inflationary pressures accelerated in the quarter. The personal consumption expenditures price index rose 4.5%, compared with 2.9% in the prior quarter. Excluding food and energy, the PCE index climbed 4.3%, up from 2.7%.
Economists polled by Reuters had forecast first-quarter GDP growth of 2.3%. A revised estimate is scheduled for release on May 28.
