The U.S. economy grew at a 2% annual rate in the first quarter, but the number now matters for a different reason: it captures what happened before the war with Iran really started feeding through energy prices. The Commerce Department’s GDP report showed consumer spending, private investment and government outlays still in solid shape as oil prices were surging.
That is the reframing. The story is no longer whether growth can survive a weak consumer or a shutdown hangover; it is whether higher fuel costs can squeeze demand fast enough to offset the support from business investment and tax refunds. Brent crude jumped to $120 a barrel this week from around $70 in February, and contracts for July and August delivery have already topped $100.
- Personal consumption rose 1.6% in the quarter, and spending was still strongest among higher-income households. NPR’s read was that tax refunds helped keep lower- and middle-income consumers in the game.
- Business investment, including heavy AI spending, helped lift GDP. The Wall Street Journal reported that firms were still putting money to work even as consumer growth slowed.
- Inflation is already doing work on policy. CNN noted the war is pushing the Fed to delay further rate cuts while oil stays above $100.
That leaves a clean line for investors, borrowers and companies: growth can still print at 2% while the inflation impulse gets stronger underneath it. If gasoline stays elevated, the quarter’s resilience stops being a sign of momentum and starts looking like the last good read before the squeeze. The Washington Post said consumers were already showing fatigue as prices rose.
The number to watch now is whether energy costs stay high long enough to turn a solid GDP print into a weaker second quarter. If Brent stays above $100, the consumer gets tighter and the Fed gets less room to move.
