The U.S. economy grew at a 2% annual rate in the first quarter, even as the war with Iran pushed energy prices sharply higher, according to the Commerce Department’s GDP release. Consumer spending rose 1.6%, government spending rebounded, and business investment stayed firm. early-2026 GDP data
This section is really about a market assumption that has shifted: the economy can absorb an oil shock, but only up to a point. Brent has jumped to $120 a barrel from about $70 before the war, July and August crude contracts are above $100, and those prices are now working through households, companies, and inflation data. Brent’s surge
- Personal consumption still grew 1.6% in the quarter, helped by stronger tax refunds and spending by higher-income households. consumer spending
- AI investment helped boost growth, while softer consumer spending kept the economy from running hotter. business investment
- The war has already made the Fed’s job harder by keeping gas prices elevated and delaying rate-cut expectations. Fed timing
The sticky line here is simple: the economy is still growing, but oil is now the constraint. If higher energy prices stick for months, the 2% growth number will matter less than whether consumers keep spending after the tax-refund boost fades. first-quarter growth
That leaves one live question for the next print: whether households outside the top income bracket can keep carrying consumption while gasoline stays expensive and inflation keeps moving up. household demand
