US economic growth rebounds 2% as consumer spending slows amid Iran war

First quarter output, driven by AI investment and government spending, rose as oil shock fuels inflation fears

US gross domestic product (GDP) accelerated 2% in the first three months of 2026, though consumer spending is slowing as the war with Iran continues to impact energy prices.

The last GDP reading for the fourth quarter of 2025 showed that US economic growth slowed to a 0.5% pace, largely due to a contraction in government spending after massive layoffs of federal workers last year. The federal government is down 355,000 workers, or 11.8% of the workforce, since October 2024, according to the Bureau of Labor Statistics.