News & Insights

Real GDP increased at an annual rate of 2.0% in the first quarter of 2026, up from a 0.5% rise in the fourth quarter but slightly below consensus expectations. The increase in GDP during the first quarter mostly reflected increases in investment, consumer spending on services, exports and government spending, which were partially offset by reductions in consumer spending on goods and an increase in imports. Since, by definition, GDP measures domestic output, imports are subtracted from the final calculation since they are reflected in other parts of the equation, such as inventories and consumption.

Consumer spending grew at an annual rate of 1.6%, down from a 1.9% increase in the fourth quarter, with spending on services (up 2.4%) driving the gain, while spending on goods declined (down 0.1%). Consumer spending on nondurable goods edged down 0.2%, but spending on durable goods stayed the same after ticking up 0.1% in the fourth quarter. The decline in nondurable goods consumer spending was driven by food and beverages and clothing and footwear, with increases in other nondurable goods categories. Meanwhile, for consumer spending on durable goods, increases in motor vehicles and parts, furnishings and other durable goods were offset by drops in spending on recreational goods and vehicles. Within services, spending increases were relatively widespread, with health care being the largest contributor to the gain.

Investment grew 8.7% at an annual rate in the first quarter, after rising 2.3% in the fourth quarter. The improvement was driven by 13.0% and 43.4% surges in intellectual property products and information processing equipment investments, respectively, up from 5.4% and 4.3% in the fourth quarter. Meanwhile, business spending on structures declined 6.7%. Exports jumped 12.9% in the first quarter, with the rise primarily concentrated in goods exports (up 18.1%). At the same time, imports soared 21.4% in the first quarter, with the increase also primarily concentrated in goods (up 25.8%). The jump in federal government spending (up 9.3%) was driven by the rebound from the extended government shutdown in the fourth quarter, with nondefense spending up 20.3%. Meanwhile, state and local government spending increased 1.6% in the first quarter, up slightly from the 1.5% rise in the prior quarter.