First-quarter economic growth accelerated to 2%, driven by AI investment and government spending, while consumer spending weakened amid Iran war energy costs.
11:31 AM
US gross domestic product accelerated 2% in the first three months of 2026, according to official data released Wednesday. The growth marked a rebound from the fourth quarter of 2025, when economic expansion slowed to 0.5%.
The first-quarter expansion was driven primarily by artificial intelligence investment and government spending. Government expenditure jumped 10% compared with the previous quarter, reversing a contraction that had weighed on late 2025 growth. In the fourth quarter, government spending had contracted 5.4%, but that figure improved to a 4.4% increase in the first quarter.
The federal government workforce has declined significantly since October 2024. According to the Bureau of Labor Statistics, the federal workforce is down 355,000 workers, representing an 11.8% reduction from its size in October 2024. The massive layoffs of federal workers had contributed to the slowdown in government spending that depressed fourth-quarter growth.
Consumer spending, however, showed signs of weakness in the first quarter. The slowdown in household expenditure occurred as the ongoing war with Iran continued to affect energy prices. Fuel prices remained elevated, with photographs from Brooklyn gas stations on April 28 showing the continued impact on consumers at the pump.
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