US economy grows 2% in January–March; Iran war clouds outlook

The US economy accelerated at the start of 2026, expanding at a modest 2 per cent pace from January through March after recovering from last fall’s 43-day federal government shutdown. But the outlook is clouded by the Iran war.The Commerce Department reported on Thursday that gross domestic product – the nation’s output of goods and services – rebounded from a lacklustre 0.5 per cent expansion the last three months of 2025. The federal government’s spending and investment grew at a 9.3 per cent annual rate in the first quarter, adding more than half a percentage point to growth after lopping off 1.16 percentage points in fourth-quarter 2025.Growth in consumer spending, which accounts for 70 per cent of US economic activity, slowed to 1.6 per cent in the first quarter from 1.9 per cent at the end of 2025. But business investment, likely driven by investments in artificial intelligence, rose at an 8.7 per cent pace.