Real GDP growth accelerated in the first quarter of 2026, rebounding from a weak finish at the end of 2025, as government spending recovered following a disruptive shutdown. First-quarter growth was also supported by strong gains in business investment in equipment, driven by an artificial intelligence spending boom and rapid data center construction. Meanwhile, consumer spending showed signs of softening as elevated inflation continued to weigh on household purchasing power.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 2.0% in the first quarter, up from a 0.5% increase in the fourth quarter of 2025. This growth rate came in slightly above the NAHB forecast for the quarter (1.8%).
However, the latest data from the GDP report indicates that inflationary pressures remained elevated. The price index for gross domestic purchases rose 3.6% in the first quarter, compared with an increase of 3.7% in the fourth quarter of 2025. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, accelerated to 4.5%. This is higher than a 2.9% rise in the previous quarter.
Breaking down the first-quarter data further, the acceleration in real GDP primarily reflected increases in government spending, exports, and business investment, which were partially offset by a slowdown in consumer spending. Imports, which are a subtraction in the calculation of GDP, increased during the quarter.
Consumer spending, the backbone of the U.S. economy, rose at an annual rate of 1.6% in the first quarter, the slowest pace since the first quarter of 2025. Within this category, spending on services grew at a 2.4% annual rate, while spending on goods edged down 0.1%.
Gross private domestic investment contributed 1.48 percentage points to headline GDP growth, led by robust gains in equipment and intellectual property products, alongside a buildup in private inventories. These increases were partially offset by declines in both residential and nonresidential structures.
Nonresidential fixed investment rose sharply, increasing 10.4% in the first quarter. Strong gains in equipment (+17.2%) and intellectual property products (+13.0%) offset a decrease in structures (-6.7%). Meanwhile, residential fixed investment (RFI) declined 8.0% in the first quarter, marking the fifth consecutive quarterly decline. Within the residential category, single-family permanent site structures fell 8.0% at an annual rate, multifamily permanent site structures posted a modest 1.9% increase, and spending on home improvements dropped 4.6%.
Government spending provided a notable boost to growth, largely due to an increase in federal nondefense expenditures following the prior quarter’s disruptions.
Trade activity also strengthened, with both exports and imports increasing. The increase was primarily driven by the goods trade, particularly in computers, peripherals, and related components.
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