US economy grows 2% in Q1, below expectations, as inflation pressures intensify

The US economy expanded at an annualized rate of 2% in the first quarter of 2026, accelerating from 0.5% in the final quarter of last year but coming in below market expectations, the Commerce Department’s Bureau of Economic Analysis said Thursday.

The advance estimate showed that growth in the January-March period was supported by investment, exports, consumer spending and government spending.

Compared with the fourth quarter of 2025, the acceleration in real GDP reflected increases in government spending, exports and investment that were partly offset by a slowdown in consumer spending.

Imports, which are subtracted in the calculation of gross domestic product, also increased.

Real final sales to private domestic purchasers, a measure of underlying domestic demand that includes consumer spending and gross private fixed investment, increased 2.5% in the first quarter, compared with a 1.8% rise in the previous quarter.

At the same time, price pressures intensified during the quarter, with the personal consumption expenditures (PCE) price index rising 4.5%, up from 2.9% in the fourth quarter.

The core PCE price index, which excludes food and energy, rose 4.3%, compared with a 2.7% increase in the previous quarter.

The price index for gross domestic purchases increased 3.6% in the first quarter, slightly slower than the 3.7% rise recorded in the fourth quarter.

The figures come as the Federal Reserve monitors persistent inflation risks while assessing the strength of the economy after leaving its benchmark interest rate unchanged at its latest policy meeting Wednesday.