US economy grew two per cent between January and March

The United States economy accelerated at the start of 2026, expanding at a modest 2 per cent pace from January through March after recovering from last northern autumn's 43-day federal government shutdown.

But the outlook is clouded by the Iran war.

The Commerce Department reported on Thursday that gross domestic product - the country's output of goods and services - rebounded from a lacklustre 0.5 per cent expansion the last three months of 2025.

The federal government's spending and investment grew at a 9.3 per cent annual rate in the first quarter, adding more than half a percentage point to growth after lopping off 1.16 percentage points in fourth-quarter 2025.

Growth in consumer spending, which accounts for 70 per cent of US economic activity, slowed to 1.6 per cent in the first quarter from 1.9 per cent at the end of 2025.

Spending on goods, including food and clothing fell slightly.

Spending on services slowed.

But business investment, likely driven by spending in artificial intelligence, rose at an 8.7 per cent pace.

A weak housing market continues to weigh on the economy.

Residential investment fell at an 8.0 per cent annual pace - the fifth straight quarterly drop and the biggest since the end of 2022.

Excluding housing, non-residential investment surged 10.4 per cent, the biggest jump in nearly three years.

An uptick in imports, which rose at an annual rate of 21.4 per cent from January-March, slashed more than 2.6 percentage points off first-quarter growth.