U.S. Economy Grew at 2.1% Annual Pace in Q1, Beating Expectations

The U.S. economy expanded at a 2.1% annual rate in the first quarter of 2026, according to the Commerce Department’s final estimate released June 25. The figure marks a sharp upward revision from the previous estimate of 1.6% and a rebound from the sluggish 0.5% growth recorded in the fourth quarter of 2025, which was dragged down by a 43-day federal government shutdown. Business investment surged by 10.6%, likely reflecting a boom in artificial intelligence-related spending, while consumer spending—the backbone of the U.S. economy—fell sharply, signaling potential consumer pullback amid rising gasoline prices linked to the conflict with Iran. Excluding housing, private investment jumped 10.6%, up from 2.4% in Q4 2025. Residential investment, however, dropped 7.8%, marking the fifth consecutive quarterly decline and the largest fall since late 2022, driven by high interest rates. Federal government spending and investment rose 9.4% after plunging 16.6% in the previous quarter due to the shutdown. Despite energy market disruptions from the Iran conflict, the U.S. economy—the world’s largest—has shown resilience, with the job market adding an average of 188,000 jobs per month from March to May, a stark contrast to the fewer than 10,000 jobs added monthly in 2025 amid trade and immigration policy uncertainty. The final Q1 GDP report was released June 25, with the first look at Q2 growth scheduled for July 30.