The U.S. economy hit a slight jump-start as 2026 began.
According to numbers released Thursday by the Commerce Department, the economy expanded at a 2% pace from January through March. While the acceleration comes after recovering from last fall’s 43-day federal government shutdown, the Iran war is still casting something of a pall over the figures.
According to the Commerce Department report, gross domestic product — the nation’s output of goods and services — rebounded from just a 0.5% expansion in the last quarter of 2025. The federal government’s spending and investment grew at a 9.3% annual rate in the first quarter, adding more than half a percentage point to growth after lopping off 1.16 percentage points in fourth-quarter 2025, according to a report from The Associated Press.
Growth in consumer spending — 70% of U.S. economic activity — slowed to 1.6% in the first quarter from 1.9% at the end of 2025. Spending on goods, including food and clothing, fell slightly. Spending on services slowed, according to the AP report.
But business investment, perhaps hastened along by spending in artificial intelligence, rose at an 8.7% pace. A weak housing market continues to weigh on the economy. Residential investment fell at an 8% annual pace — the fifth straight quarterly drop and the biggest since the end of 2022.
“This is a split-screen economy,” Heather Long, chief economist at the Navy Federal Credit Union, wrote, according to the AP. “Companies and investors involved in AI are on fire. Meanwhile, middle and moderate income households are struggling with high gas prices … Consumption is slowing as people are struggling to manage all their bills and growing more concerned about the future.’’
