WASHINGTON–U.S. economic growth picked up in the first quarter, in large part due to heavy investments by businesses in artificial intelligence, but consumer spending slowed, with U.S. GDP increasing at a seasonally and inflation-adjusted 2% annual rate, according to new numbers released by the Commerce Department.
Consumer spending, which is the driver of the U.S. economy, was up 1.6% in Q1, slower than the 1.9% pace in the fourth quarter of 2025. Nonresidential fixed investment spending by businesses rose at a 10.4% rate, with the Commerce Department saying spending on intellectual property and equipment was particularly strong, a sign companies continued to invest heavily in artificial intelligence.
“First quarter GDP was in line with expectations, as a surge in business investment offset a sizable drag from trade,” said Americas Credit Unions Chief Economist Curt Long in a statement. “Consumption was relatively weak across the quarter, but most of that was concentrated in January when severe winter weather kept consumers home. The PCE index—the Federal Reserve’s preferred inflation measure—rose to its highest level in nearly three years. Economic growth is trending steadily upward as the AI boom is proving to be strong and durable enough to compensate for other areas of weakness, but inflation shows no signs of moderating. Credit unions remain focused on addressing their members’ affordability concerns by offering low-cost financial services.”
Other Data Points
Other data points include:
- Final sales to private domestic purchasers rose at a 2.5% rate in the first quarter, picking up from 1.8% in the prior quarter. That measure removes more volatile government, inventory and international trade data.
- Spending by the federal government rose at a 9.3% rate, picking up strongly from a 16.6% contraction in the prior quarter. The fourth-quarter drag was due to the record-long government shutdown, which ended in November.
- Net exports, a measure of what the country exports minus what it imports, were a drag on growth in the first quarter, subtracting 1.3 percentage point as imports outpaced export.
As the CU Daily reported here, attendees at the NACUSO meeting this week were given numerous insights and were challenged by one economist on what to make of economic data.
