U.S. economic growth since the start of the war has fallen short of expectations. Inflation accelerated

According to the preliminary estimate of the U.S. Bureau of Economic Analysis, the country's GDP - the value of all goods and services produced in the U.S. in the first quarter of 2026 - grew by 2% year-on-year, adjusted for seasonal fluctuations and inflation. Economists surveyed by The Wall Street Journal expected GDP growth of 2.2% from January through March.

Consumer spending, which accounts for about two-thirds of economic activity, meanwhile rose 1.6 percent over the same period, beating economists' expectations, thanks to increased demand for services, Bloomberg writes.

The report also points out that the U.S. economy has so far remained stable despite soaring energy prices and a conflict in the Middle East that has disrupted global supply chains, but the geopolitical situation risks dampening growth prospects if inflation-weary consumers become more cautious, Bloomberg points out.

Published simultaneously with GDP data, the core PCE (core PCE - excluding volatile food and energy prices), the Federal Reserve's preferred measure of inflation, rose 0.3% month-on-month and 3.2% year-on-year in March, also reflecting the impact of the war with Iran, Barron's notes. Economists surveyed by FactSet had expected to see the rate at 0.25% and 3.2%, respectively.

The Consumer Spending Index (PCE) meanwhile accelerated 3.5% year-on-year in March, reaching its highest level since August 2023, and increased 0.7% month-on-month. While both of these figures were broadly in line with economists' expectations, they were well above February's 2.8% and 0.38%, respectively, Barron's states.

The latest macroeconomic data is likely to pave the way for a prolonged pause in interest rate hikes in the US and could give carte blanche to advocates of tight monetary policy at the Fed to push for rate hikes in the coming months, Barron's points out. The day before, the Fed - for the third time in a row - decided to leave the US interest rate unchanged.

Futures on U.S. stocks rose amid the publication of macroeconomic data: contracts on Dow Jones added 0.6%, on S&P 500 - almost 0.5%, on Nasdaq Composite - 0.6%.

This article was AI-translated and verified by a human editor