Gross domestic product grew at a 2% annual rate in the first quarter, adjusted for inflation, the Bureau of Economic Analysis reported in a preliminary reading Thursday morning.
Forecasters had expected a 2.2% rate.
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The first-quarter growth improves on an anemic 0.5% rate in the fourth quarter of 2025, relieving some of the pressure on President Donald Trump, whose economic approval has declined because of high inflation.
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The improvement in the GDP growth rate in the first quarter was largely attributable to greater government spending, as well as more exports. Business investment, too, accelerated rapidly, driven by major spending on information processing equipment, likely a reflection of the booming artificial intelligence sector.
“The economy showed steady growth in the first quarter despite the colder weather at the start of the year and the Middle East war and surge of energy price inflation in the final month of the quarter,” FWDBONDS chief economist Christopher Rupkey wrote in a note on Thursday’s release. “It was AI spending to the rescue with the big increases in business investment in equipment and intellectual property products driving the first quarter results.”
Friday’s report is the first of three revisions to the data.
In 2025, the economy expanded more than expected after the early part of Trump’s second term was marked by his aggressive tariff policy. The blanket imposition of major tariffs on countries worldwide last year led to a major drop in stock prices and buttressed fears that an economic downturn was coming.
But the labor market has notably managed to remain above water.
The economy added 178,000 jobs in March, good news for the economy, and the unemployment rate fell slightly to 4.3%, according to the Bureau of Labor Statistics. Still, employment growth has generally slowed over time.
But outside of economic growth and jobs, the bigger story for the economy has been inflation, which is the No. 1 issue for voters and has caused consumer sentiment to sour.
Inflation spiked in March, rising nine-tenths of a percentage point to 3.3% on the year, as towering energy prices drove up the headline number, according to the most recent consumer price index reading.
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That has caused consumer sentiment to dip dramatically. Consumer sentiment fell to a record low in April, dropping below levels seen during the worst of the Great Recession and during the COVID-19 lockdown.
Now, the top threat to the economy is the disruptions caused by the war with Iran.
The conflict has driven the price of oil over $100 a barrel, raising transportation costs and overall inflation. Gas prices now average over $4 nationwide.
