WASHINGTON (AP) — The U.S. economy expanded at a solid and unexpected annual rate of 2.1% from January to March, the Commerce Department reported Thursday in its final estimate of first-quarter growth.
Growth in gross domestic product, the country’s output of goods and services, showed a rebound from a 0.5% decline in the last three months of 2025, when a 43-day federal government shutdown weighed on the economy. Thursday’s number was revised upward from Commerce’s previous forecast for first-quarter growth of 1.6%.
Capital investment increased sharply, probably reflecting the capital investment boom. artificial intelligence. but consumption expenditureDemand, which accounts for about 70% of U.S. economic activity, was down significantly from Commerce’s previous estimates for the fourth quarter of 2025, a sign that consumers may be saving money in the face of rising gasoline prices due to the pandemic. war with iran.
“It was concerning to see further downward revisions to consumer spending,” Heather Long, chief economist at Navy Federal Credit Union, said in a comment. As the U.S. and Iran continue talks to resolve the conflict, “spending is likely to increase[in the second quarter]but it’s worth watching closely… It’s been a tough few months for American consumers, but we’ve largely weathered it. The question is how much relief we’ll get.”
Private investment, excluding housing, increased by 10.6% from 2.4% in the fourth quarter of 2025. In a sign of the AI boom, investment in information processing equipment soared by 39.9% as companies rushed to equip data centers. But Michael Reid, head of U.S. economics at RBC Capital Markets, said before the report was released on Thursday that he expected data center investment to lose momentum.
Housing investment, weighed down by high interest rates, fell 7.8% in the January-March period, the biggest decline since late 2022 and the fifth straight quarter of decline.
Federal government spending and investment increased 9.4% in the first quarter after declining 16.6% from October to December 2025, primarily due to the government shutdown.
Imports, which are subtracted from GDP, grew at a slower pace than previously estimated for the January-March period. It is still 1.49 percentage points subtracted from the first quarter’s growth rate, but it is down from the 2.59 percentage points previously forecast and was the main factor behind Thursday’s hike.
The US economy, the world’s largest, continues to perform well despite the Iranian energy shock. The U.S. job market has proven particularly resilient. Employers added an average of 188,000 jobs a month from March to May, but will add fewer than 10,000 jobs a month in 2025 amid uncertainty over President Donald Trump’s trade and immigration policies.
Thursday’s report was the Commerce Department’s third and final estimate of first-quarter gross domestic product (GDP) growth. The first report on economic growth for the second quarter is expected on July 30th.
