The final annualized GDP growth rate for the first quarter in the U.S. was revised upward to 2.1%, significantly better than the second estimate of 1.6%. Although the surge in business investment—fueled by the AI boom—was the primary driver behind the revision, final sales to private domestic purchasers, a key indicator of underlying economic momentum, were revised downward by 0.7 percentage points to 1.7%, signaling lingering concerns about consumer recovery. Meanwhile, the PCE price index was slightly revised upward to 4.6%.
The U.S. Department of Commerce released the final reading of first-quarter gross domestic product (GDP) on Thursday, showing an annualized growth rate revised upward to 2.1%, an increase of 0.5 percentage points from the second estimate and significantly exceeding economists' expectations, marking a clear rebound of the world's largest economy from its sluggish performance in the fourth quarter of the previous year.
This final figure markedly exceeded the previous second estimate of 1.6% and was also higher than the initial 2.0% growth rate released by the Department of Commerce. Markets had originally anticipated the final reading to be broadly in line with the second estimate. According to data from the Bureau of Economic Analysis (BEA), the sharp acceleration in business investment—potentially driven by heightened investment activity in artificial intelligence—served as the core engine behind the upward revision, with export expansion and import contraction providing additional supportive contributions.
However, the aggregate data also masked underlying concerns regarding domestic demand. Final sales to private domestic purchasers—a critical gauge of endogenous economic momentum—were revised down by 0.7 percentage points to 1.7% compared with the second estimate. Consumer spending also declined notably relative to both the fourth quarter of 2025 and the prior estimate, indicating mounting pressure on household consumption.
In the fourth quarter of 2025, a 43-day federal government shutdown reduced U.S. GDP growth to just 0.5%. The release of this quarter’s final GDP figure marks a significant rebound. The Department of Commerce will issue its advance estimate for second-quarter GDP on July 30.
Business Investment Leads, Bolstered by AI Boom
The primary driver behind this GDP revision was robust growth in business investment. BEA data show that investment, exports, and government spending all contributed positively to growth, while declining imports further amplified the net export contribution. According to the Associated Press, the surge in business investment is likely closely tied to the investment boom in the artificial intelligence sector.
In contrast, consumer spending declined noticeably compared with the fourth quarter of 2025, standing in stark contrast to the strength seen in business investment. Against the backdrop of energy-related disruptions stemming from Iran and broader macroeconomic uncertainty, the structural characteristics of this phase of economic growth warrant close attention.
Weak Domestic Demand Momentum, Key Indicator Revised Downward
Despite the strong headline growth figure, core indicators reflecting the quality of underlying economic momentum have sent cautionary signals. Final sales to private domestic purchasers—a metric that excludes volatile components such as inventory changes and trade and is widely regarded as a core measure of genuine domestic demand—were revised downward by 0.7 percentage points to 1.7% in the final estimate, falling below the second estimate.
This suggests that the stronger-than-expected first-quarter GDP growth relied to some extent on volatile components such as trade and inventory accumulation, and the relatively weak momentum in endogenous domestic demand remains a concern requiring continued market vigilance.
Inflation revised slightly upward, with PCE rising to 4.6%
On inflation data, the final reading of the Personal Consumption Expenditures (PCE) price index was revised upward by 0.1 percentage point from the second estimate of 4.5% to 4.6%; the core PCE price index, excluding food and energy, remained unchanged at 4.4%.
Labor market shows notable resilience; Q2 data to be released at end-July
Despite uncertainties stemming from Iran’s energy-related disruptions, the U.S. labor market has demonstrated considerable resilience. From March to May, employers added an average of 188,000 jobs per month, a significant improvement compared to the weak pace of less than 10,000 jobs per month seen throughout 2025, which was weighed down by uncertainties surrounding Trump’s trade and immigration policies.
The Department of Commerce will release its first estimate of second-quarter GDP growth on July 30, providing markets with a key reference point for assessing the trajectory of the U.S. economy in the second half of the year.
Editor/melody