The US economy grew at an annual rate of 2pc in the first quarter, led by government spending and investments in the artificial intelligence (AI) buildup.
Growth in gross domestic product (GDP), in the first of three estimates, followed seasonally adjusted annual growth of 0.5pc in the fourth quarter of 2025, during the 43-day federal government shutdown, the Bureau of Economic Analysis (BEA) reported Thursday. GDP growth averaged 2pc in 2025. Economists surveyed by Trading Economics had forecast 2.3pc growth for the first quarter.
"The big picture is that growth already was sluggish ahead of the energy shock, with the economy's underlying momentum anemic outside the continued surge in AI-related capex," Pantheon Macroeconomics said in a note.
Growth in the first quarterreflected upturns in government spending, exports and investment that were partly offset by a deceleration in consumer spending.
Consumer spending rose by 1.6pc in the first quarter following growth of 1.9pc in the fourth quarter.
Spending on private investment rose by 8.7pc following 2.3pc growth in the fourth quarter. Spending on equipment rose by 17.2pc and spending on intellectual property products rose by 13pc, both parts of the AI buildout. Residential investment spending fell by 8pc, reflecting the ongoing slump in housing construction.
"Recent indicators suggest that economic activity has been expanding at a solid pace," Federal Reserve chairman Jerome Powell said Wednesday in his last press conference as head of the central bank.
In the near term, higher energy prices due to the war in the Middle East will push up overall inflation, he said. "Beyond that, the scope and duration of potential effects on the economy remain unclear," Powell said.
Net exports weighed on GDP growth, with exports rising by 12.9pc, while imports, which subtract from growth, rose by 21.4pc.
Federal government spending rose by 9.3pc in the first quarter after falling by 16.6pc in the fourth quarter on the government shutdown.
Defense spending grew by 20.3pc in the first quarter after falling by 24pc in the fourth quarter.
