WASHINGTON (AP) 鈥� The U.S. economy expanded at a solid and unexpected 2.1% annual pace from January through March, the Commerce Department reported Thursday in its final estimate of first-quarter growth.
The growth in gross domestic product 鈥� the nation鈥檚 output of goods and services 鈥� marked a rebound from a sluggish 0.5% in the last three months of 2025 when a 43-day federal government shutdown weighed on the economy. Thursday鈥檚 numbers were an upgrade from of Commerce鈥檚 previous first-quarter estimate of 1.6% growth.
Business investment surged, probably reflecting an investment boom in . But , which accounts for around 70% of U.S. economic activity, fell sharply from fourth-quarter 2025 and from Commerce鈥檚 previous estimate in a sign that consumers may be cutting back in the face of higher gasoline prices caused by the .
鈥淚t was unsettling to see consumer spending revised even lower,鈥� Heather Long, chief economist at Navy Federal Credit Union, said in a commentary. “Spending is likely to tick up in (the second quarter), but it鈥檚 worth watching carefully… It鈥檚 been a tough few months for American consumers, but most have been able to make it through. The question is how much relief is coming鈥� as the U.S. and Iran continue talks toward a resolution of the conflict.
Excluding housing, private investment jumped 10.6%, up from 2.4% in fourth-quarter 2025. In a sign of the AI boom, investment in information-processing equipment jumped at a 39.9% pace as companies scrambled to outfit their data centers. But Michael Reid, head of U.S. economics at RBC Capital Markets, said before Thursday鈥檚 report came out that 鈥渦nfortunately, it鈥檚 not a sustainable path.鈥欌�� He expects data center investment to lose momentum going forward.
Residential investment, weighed down by high interest rates, dropped 7.8% from January through March, biggest fall since late 2022 and the fifth straight quarterly decline.
The federal government’s spending and investment rose at a 9.4% clip in the first quarter after dropping 16.6% in October-December 2025 largely because of the government shutdown.
Imports, which are subtracted from GDP, grew at a slower pace than last estimated from January through March. They still subtracted 1.49 percentage points from first-quarter growth, but that was down from a 2.59 percentage-point hit in the previous estimate and was a major factor in Thursday’s upgrade.
The U.S. economy 鈥� the world鈥檚 biggest 鈥� has continued to chug along despite the Iran energy shock. The American job market has proven especially resilient. Employers added an average 188,000 jobs a month from March through May after adding fewer than 10,000 a month in 2025 amid uncertainty over President Donald Trump鈥檚 trade and immigration policies.
Thursday鈥檚 report was the Commerce Department鈥檚 third and final estimate of first-quarter GDP growth. The first look at second-quarter economic growth is due July 30.
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