The economy didn’t fare as well as first thought in the first three months of 2026.
According to a report from Reuters, U.S. economic growth was not a strong as initially thought in the first quarter and – with the war with Iran raising inflation — momentum is set to slow this quarter.
In its second look at first-quarter GDP, the Commerce Department on Thursday said gross domestic product increased at a 1.6% annualized rate last quarter. Growth was previously reported to have advanced at a 2.0% pace. Economists polled by Reuters had expected that GDP growth would be unrevised at a 2.0% rate.
The economy grew at a 0.5% pace in the fourth quarter. The downgrade to the first-quarter GDP estimate reflected downward revisions to inventory investment and consumer spending, Reuters reported.
Overall economic activity is mostly being driven by artificial intelligence-related spending.
Reuters reported growth in consumer spending, which accounts for more than two-thirds of the economy, was revised down to a 1.4% rate from the previously reported 1.6% pace. Hefty tax refunds provided some cushion to households from soaring gasoline prices.
Business spending on equipment increased at an unrevised 17.2% growth pace. Final sales to private domestic purchasers, which exclude government, trade and inventories, rose at a 2.4% pace. That as a slight downgrade from the previously estimated 2.5% growth rate.
When measured from the income side, the economy grew at a 0.9% rate in the January-March quarter. Gross domestic income increased at a 1.6% pace in the fourth quarter, according to the report.
Economists expect the conflict in the Middle East to weigh on economic growth from the second quarter.
