US economy grew two per cent between January and March

The United States economy accelerated in early 2026, posting modest 2 percent growth from January to March after recovering from the 43-day federal government shutdown last fall.

However, the outlook was clouded by the Iran war.

Gross domestic product, the country’s production of goods and services, has recovered after weak growth of 0.5 percent in the last three months of 2025, the Commerce Department said on Thursday.

Federal government spending and investment increased at an annual rate of 9.3 percent in the first quarter and contributed more than half a percentage point to growth, after falling by 1.16 percentage points in the fourth quarter of 2025.

Growth in consumer spending, which accounts for 70 percent of U.S. economic activity, slowed to 1.6 percent in the first quarter from 1.9 percent at the end of 2025.

Spending on goods, including food and clothing, fell slightly.

Spending on services has slowed.

But business investment increased by 8.7 percent, likely driven by spending on artificial intelligence.

The weak housing market continues to weigh on the economy.

Housing investment fell at an annual rate of 8.0 percent; It’s the fifth consecutive quarter of decline and the largest decline since the end of 2022.

Non-residential investments excluding housing increased by 10.4 percent, the largest increase in nearly three years.

The increase in imports, which increased by 21.4 percent annually in the January-March period, reduced the growth in the first quarter by more than 2.6 percentage points.