The U.S. economy expanded at a much stronger pace in the first quarter than previously estimated, according to newly revised government data released Thursday
The Commerce Department's Bureau of Economic Analysis (BEA) said gross domestic product (GDP), the broadest measure of economic activity, grew at an annualized rate of 2.1% during the January through March period. That marked a significant upward revision from the previously reported 1.6% pace and exceeded economists' expectations that the estimate would remain unchanged.
The stronger GDP figure follows a modest 0.5% annualized expansion recorded during the final quarter of 2025, suggesting the economy entered 2026 with greater momentum than initially believed.
However, the upgrade was driven largely by technical adjustments rather than stronger domestic demand. The BEA said the revision primarily reflected a smaller-than-previously estimated surge in imports, particularly consumer and capital goods. Because imports subtract from GDP calculations, lower import levels mechanically boosted overall economic growth.
At the same time, consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised sharply lower. The government slashed its estimate for consumer spending growth to just 0.5%, down from the previous 1.4% estimate. The downgrade reflected weaker spending on services, including financial services, insurance, and international travel, according to the report.
The weak reading represents one of the slowest rates of consumer spending growth in recent years and highlights softer underlying demand despite the stronger headline GDP figure.
Final sales to private domestic purchasers, which exclude the effects of trade, inventories, and government spending and are considered a better indicator of underlying private-sector demand, were revised down to 1.7% from the previously reported 2.4%. Economists often view this measure as a clearer reflection of the economy's core momentum because it focuses on spending by households and businesses.
Despite the slowdown in consumer activity, business investment remained a bright spot. Investment in equipment and intellectual property continued to receive support from spending tied to artificial intelligence infrastructure and technology development, helping offset softer household demand.
Corporate America also posted stronger earnings. The BEA reported that corporate profits increased at an annualized rate of $74.4 billion during the first quarter, while gross domestic income (GDI), an alternative measure of economic activity based on income earned rather than spending, was revised upward to 1.2% growth.
When GDP and GDI are averaged together, a measure many economists consider a more reliable gauge of overall economic performance, growth was revised to 1.7%, indicating the economy remained on a moderate expansion path despite uneven demand.
Looking ahead, economists expect economic activity to strengthen during the second quarter. Recent data suggest consumer spending rebounded in May as households benefited from larger tax refunds, while business investment has continued to receive support from AI-related projects.
At the same time, rising gasoline prices earlier this year, fueled by tensions surrounding the U.S.-Iran conflict, have added pressure to household budgets and contributed to higher inflation.
Separate government data released Thursday showed inflation remained elevated, with the Federal Reserve's preferred inflation measure climbing to 4.1% in May. Even so, consumer spending rose 0.7% during the month, reinforcing expectations that second-quarter GDP growth could accelerate to around 3%, according to many economists.
