GDP rose at 2% annual rate in first quarter as U.S. economy rebounds

The U.S. economy expanded at an annual rate of 2% in the first three months of 2026, slower than forecasters expected but a rebound from weak growth in the previous quarter, new government data shows. Economists polled by FactSet had projected the nation's gross domestic product — the total value of goods and services produced in the U.S. — to rise at an annualized rate of 2.2% for the January to March quarter. "The core of the economy remained solid in Q1, driven by the AI buildout and the tax cuts beginning to feed through," Michael Pearce, chief U.S. economist with Oxford Economics, said in a note to investors. "Those factors will continue to drive growth over the rest of the year, but the jump in energy prices will take some of the shine off what would otherwise have been a strong year for the economy." The latest GDP reading marks a reversal from the fourth quarter of last year, when the economy grew at a meager 0.5% pace after being slammed by a government shutdown. Business investment driven largely by the AI boom rose 8.7% on an annual basis, the Commerce Department reported on Thursday. At the same time, consumer spending — which drives nearly two-thirds of economic activity in the U.S. — slowed slightly from last quarter, falling from 1.9% at the end of 2025 to 1.6%. Recent Bank of America data shows most of the growth in March was driven by higher-income households. While the economy has remained resilient, the Iran war is clouding the outlook. …