US GDP Likely Bounced Back in Q2

The US economy expanded an annualized 2.1% in Q1 2026, revised up from 1.6% in the second estimate, and above 0.5% in Q4 2025. The contribution from net trade was less negative than initially estimated (-0.37 pp vs -1.25 pp), as imports growth was revised lower (11.8% vs 21.1%) and exports rose 10.9% (vs 13.1%). In addition, gross private domestic investment increased 7.9%, higher than 7% in the previous estimate. Business investment in equipment surged 15.8% (vs 17.2%), and spending on intellectual property products went up 13.8% (vs 11.6%). In contrast, investment in structures fell 4.7% (vs -5.4%), and residential declined 7.8% (vs -6.2%). Meanwhile, consumer spending rose 0.5%, well below 1.4% previously reported, led by a big slowdown in services demand (0.5% vs 1.8%) while goods remained subdued (0.5% vs 0.4%). Government spending was up 4.4%, in line with the previous estimate, recovering from a 5.6% contraction, as activity resumed following the end of the government shutdown.

The US economy expanded an annualized 1.6% in Q1 2026, up from 0.5% in Q4 but below 2% in the advance estimate, primarily reflecting downward revisions to investment and consumer spending. Consumer spending rose 1.4%, less than 1.6% in the advance estimate. The rise was mainly supported by demand for services (1.8%) while goods remained subdued (0.4%). Also, gross private domestic investment rose 7%, below the 8.7% reported in the advance estimate. Business investment in equipment surged 17.2%, while spending on intellectual property products increased 11.6%. In contrast, investment in structures fell 5.4%, and residential investment declined 6.2%. Meanwhile, net trade contributed negatively to GDP (-1.25 pp), as exports rose by 13.1% (vs 12.9% in the first estimate) while imports jumped 21.1% (vs 21.4%). Government spending rose 4.4%, in line with the initial estimate, recovering from a 5.6% contraction in Q4, as activity resumed following the end of the government shutdown.

The US economy expanded at an annualized rate of 2.0% in Q1 2026, up from 0.5% in the previous quarter but below market expectations of 2.3%, according to a preliminary estimate. Government spending rebounded by 4.4%, recovering from a 5.6% contraction in Q4 2025, as activity resumed following the end of the government shutdown. Gross private domestic investment increased by 8.7%, compared to 2.3% in the previous quarter, with business investment in equipment and structures surging 10.4%, the fastest in nearly three years, driven in part by rapid spending on artificial intelligence technologies. Consumer spending, which accounts for roughly two-thirds of economic activity, rose at a slower pace of 1.6% in Q1, following a 1.9% increase in Q4, supported by demand for services. Net trade contributed negatively to GDP, as exports rose by 12.9% while imports jumped at a faster rate of 21.4%.