The U.S. economy moved into negative territory during the opening quarter of 2026, as stronger imports and softer government spending outweighed gains in consumer and business activity, according to the Bureau of Economic Analysis’ second estimate of gross domestic product.
Real gross domestic product (GDP), which measures the value of goods and services produced across the economy, decreased at an annualized rate of 0.5% during the January-March period. The revised estimate was weaker than the agency’s earlier projection and marked a reversal from the 2.4% growth recorded in the final quarter of 2025.
A surge in imports was the largest factor behind the decline. Because imported goods are subtracted from GDP calculations, the sharp increase weighed heavily on overall economic output. Reduced federal government expenditures also contributed to the contraction.
Despite the headline decline, several areas of the economy continued to expand. Consumer spending increased during the quarter, while business investment remained positive. Exports also posted gains, helping offset part of the drag from imports.
Inflation pressures persisted. The price index for gross domestic purchases rose 3.4% during the quarter, while the personal consumption expenditures (PCE) price index increased 3.6%. Excluding food and energy, the core PCE measure advanced 3.5%, indicating that underlying price pressures remained elevated.
Corporate earnings moved lower after posting gains in the previous quarter. Current-production profits declined by $118.1 billion in the first quarter following an increase of $204.7 billion in the final three months of 2025. Both domestic and international operations contributed to the decrease. The latest figures point to a mixed economic picture, with resilient private-sector activity offset by trade-related pressures and slower government spending, while businesses continue to navigate a challenging inflation environment.
Source: Bureau of Economic Analysis
Link: https://www.bea.gov/news/2026/gdp-second-estimate-and-corporate-profits-1st-quarter-2026
