U.S. Economy Grew 2% in Early 2026 Following Federal Shutdown

The U.S. economy accelerated at the start of 2026, expanding at a modest 2% annual pace from January through March. This growth follows a period of recovery after a 43-day federal government shutdown that took place last fall. The Commerce Department reported on Thursday that gross domestic product, which measures the nation’s total output of goods and services, rebounded from a lackluster 0.5% expansion seen in the final three months of 2025.^[1][2][3]

While the overall economy gained momentum, consumer spending growth slowed to 1.6% in the first quarter, down from 1.9% at the end of 2025. Offsetting this slowdown was business investment, which analysts suggest was likely driven by significant and ongoing investments in artificial intelligence. These internal economic drivers helped stabilize the market following the previous year's fiscal disruptions and the impact of the government closure.^[1]

Despite the positive quarterly data, the economic outlook remains clouded by the ongoing war in Iran. The conflict introduces significant uncertainty into future projections, even as the domestic economy shows resilience in its recovery from the federal shutdown. Officials and economists continue to monitor how these geopolitical tensions might impact the nation's continued expansion and consumer confidence throughout the rest of the year.^[1][2]