US Q1 2026 GDP Growth Below Forecasts

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%.

The U.S. economy likely expanded at an annualized 2.3% in Q1 2026, rebounding from a modest 0.5% gain in Q4 2025. The pickup partly reflects a bounce-back following the previous quarter’s government shutdown, with business investment in equipment providing support even as consumer spending softened. Net trade likely weighed on growth amid a surge in imports, although some of that increase may have been absorbed into inventories.

The US economy expanded at an annualized rate of 0.5% in Q4 2025, revised down further from 0.7% in the second estimate and 1.4% in the preliminary reading, mainly due to a downward revision to investment. Consumer spending slowed more than anticipated (1.9% vs 2% in the second estimate), as purchases of both goods (0.3%) and services (2.7%) cooled. Fixed investment also increased less than expected (1.5% vs 1.6%), largely due to a sharp drop in structures (-6.5%) while investment in equipment (4.3%) and intellectual property products (5.4%) remained robust. Residential investment fell more than anticipated (-1.7% vs -0.5%). Exports declined 3.2%, compared to a 3.3% fall, marking the largest contraction since Q2 2023. Imports also fell slightly less than early estimated (-1.0% vs. -1.1%). Meanwhile, government spending and investment contracted sharply (-5.6% vs -5.8%), subtracting 0.99 pp from overall growth, due to the government shutdown. For 2025, the US economy expanded by 2.1%.