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Real GDP growth accelerated in the first quarter of 2026, rebounding from a weak end of 2025, as government spending recovered following a disruptive shutdown, according to the National Association of Home Builders (NAHB). First-quarter growth was also supported by strong gains in business investment in equipment, driven by an artificial intelligence spending boom and rapid data center construction. Meanwhile, consumer spending showed signs of softening as elevated inflation continued to weigh on household purchasing power.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 2.0% in the first quarter, up from a 0.5% increase in the fourth quarter of 2025. This growth rate came in slightly above the NAHB forecast for the quarter (1.8%).
Inflationary pressures remained elevated as the price index for gross domestic purchases rose 3.6% in the first quarter, compared with an increase of 3.7% in the fourth quarter of 2025. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, accelerated to 4.5%. This is higher than a 2.9% rise in the previous quarter.
Increases in government spending, exports and business investment contributed to the acceleration in real GDP, partially offset by a slowdown in consumer spending.
In Q1, consumer spending rose at an annual rate of 1.6%, the slowest pace since Q1 2025. Within this category, spending on services grew at a 2.4% annual rate, while spending on goods edged down 0.1%.
Government spending provided a notable boost to growth, largely due to an increase in federal nondefense expenditures following the prior quarter’s disruptions. Trade activity also strengthened, with both exports and imports increasing.
