Customers wait for their orders in the food court at a wholesale store in Mount Prospect, Illinois on June 8. (Nam Y Huh/AP)
key takeaways:
- The US economy grew at a 2.1% annual rate in the first quarter, an upward revision from 1.6% on June 25 and a rebound from 0.5% in late 2025.
- Growth was driven by a 10.6% increase in business investment, likely linked to artificial intelligence, while consumer spending weakened amid higher gasoline prices due to the Iran conflict.
- Economists will keep an eye on second-quarter GDP due July 30 to assess whether consumer spending has picked up and whether growth momentum continues despite inflation and energy pressures.
WASHINGTON — The U.S. economy grew at a solid and unexpected 2.1% annual pace from January to March, the Commerce Department reported June 25 in its final estimate of first-quarter growth.
Growth in gross domestic product – the country’s production of goods and services – marked a sluggish 0.5% growth in the last three months of 2025 when the 43-day federal government shutdown hit the economy.
The June 25 figures were an upgrade from Commerce’s previous first-quarter estimate of 1.6% growth.
Business investment increased, likely reflecting a surge in investment in artificial intelligence.
But consumer spending, which accounts for about 70% of U.S. economic activity, fell sharply by the fourth quarter of 2025 and on commerce from previous estimates, a sign that consumers may be cutting back on higher gasoline prices because of the war with Iran.
Excluding housing, private investment jumped 10.6%, up from 2.4% in the fourth quarter of 2025. But residential investment, driven by higher interest rates, fell 7.8% from January to March, the biggest decline since the end of 2022 and the fifth consecutive quarterly decline.
JUST IN: Q1 GDP was revised up to 2.1%.
But look at the reason…this was due to imports being much lower than originally estimated.Consumer spending – the backbone of the US economy – was weak in Q1. It should rebound in the second quarter, but it’s worth watching closely. pic.twitter.com/kO9LCZEPuh
– Heather Long (@byHeatherLong) 25 June 2026
Federal government spending and investment grew a sharp 9.4% in the first quarter after a 16.6% decline in October-December 2025 due to the government shutdown.
The US economy – the world’s largest – has continued to grow despite the Iran energy shock. The US job market has proven particularly resilient. Employers added an average of 188,000 jobs per month from March to May after adding fewer than 10,000 per month through 2025 amid uncertainty over President Donald Trump’s trade and immigration policies.
The June 25 report was the Commerce Department’s third and final estimate of first-quarter GDP growth. The first look at second quarter economic growth is due on July 30.
