Although the US economy accelerated in early 2026, the Iran war casts a long shadow over future developments.
The Commerce Department said Thursday that gross domestic product (GDP) grew at an annual rate of 2% from January to March, recovering from a weak 0.5% growth in the last three months of 2025.
Another factor behind the recovery was the federal government’s renewed spending space after a 43-day government shutdown slowed growth late last year. Government spending and investment increased at an annual rate of 9.3% in the first quarter, adding more than half a percentage point to overall growth.
Corporate investment increases due to AI boom, but housing slumps
Consumer spending accounts for up to 70% of economic activity in the United States. The growth rate in the first quarter was 1.6%, slower than 1.9% a year earlier. However, it was business spending that saw the sharpest annual growth of 8.7%, driven largely by the AI spending boom.
However, housing remains a drag, with housing investment declining at an annual rate of 8% for five consecutive quarters. Imports surged at an annual rate of 21.4%, down more than 2.6 percentage points from the first quarter’s growth.
The report covers a period that includes about a month of fighting in Iran. Iran’s blockade of the Strait of Hormuz, through which about a fifth of the world’s oil and gas passes, has sent energy prices soaring, fueling inflation and squeezing consumers. Thursday’s release is the first of three estimates from the Commerce Department.
Powell says economy will be resilient in its final stages
A day earlier, Federal Reserve Chairman Jerome Powell said the economy was “very resilient” in the face of energy shocks and was likely to continue growing above 2% this year. In his final news conference as Fed chairman, he cited stable consumer spending and a boom in data center construction as key drivers.
“Growth across the economy is really strong,” Powell said. “Part of that is due to the clearly insatiable demand for data centers across the United States. So there’s a lot of corporate investment in building data centers, and there’s good reason to think that’s going to continue.”
Powell added that inflation should ease throughout the year as the price spikes caused by last year’s tariffs subside. However, as reported by Cryptopolitan, the Fed left its benchmark interest rate unchanged at 3.50% to 3.75%, citing “high uncertainty” due to the Middle East conflict. The Fed’s interest rate cut in the second half of 2025 was intended to protect the job market, but with interest rates currently near neutral, further easing is unlikely in the near term.
IMF warns against rate cuts, warns of debt risks
The International Monetary Fund completed its annual review of the U.S. economy in April, projecting GDP growth to reach 2.4% in 2026. But the fund took a cautious view on monetary policy, warning there was little room for the Fed to cut rates this year.
Rising energy prices, continued shifting of tariff costs into core inflation, and broader commodity price risks all point in the wrong direction for rate cuts. The IMF said easing would be justified only if the job market weakens significantly and inflation declines at the same time.
The fund noted that despite the government shutdown and changes in the policy environment, the U.S. economy performed well in 2025, with growth reaching 2%. But it showed signs of long-term concerns. The general government deficit is expected to remain in the range of 7% to 7.5% of GDP, and debt could exceed 140% of GDP by 2031.
The IMF warned that this fiscal path poses risks not only to the United States but also to the global financial system, given the central role of the U.S. debt market around the world.
On trade, the IMF acknowledged that tariff uncertainty is expected to weigh on U.S. activity and negatively impact trading partners. He called on the U.S. government to work with other countries to reduce trade barriers and address distortions that drive global imbalances.
