According to the Bureau of Economic Analysis’s second estimate, the U.S. economy expanded by 1.6% quarter-on-quarter (q/q, annualized) in the first quarter – a bit lower than 2.0% reported in the advance estimate. The downgrade was largely due to a weaker pace of consumer spending and inventory investment.
- Major contributors to Q1 growth included investment, exports, consumer spending, and government outlays, which were partially offset by a sharp rise in imports.
Consumer spending rose by 1.4% q/q (previously reported at 1.6%), a modest deceleration from Q4’s 1.9%. Goods spending was largely flat on the quarter, while services rose by a respectable 1.8% (previously 2.4%).
Business investment grew by 10.1% q/q, led by a sharp acceleration in equipment spending (+17.2%) and another solid gain in intellectual property products (+11.6%). Meanwhile, spending on structures (-5.4%) declined for the nineth consecutive quarter. Residential investment (-6.3%) also fell sharply, amid a further softening in home sales and little growth in construction activity.
Government spending (+4.4%) rebounded following a sharp drop in Q4 due to the 43-day government shutdown.
International trade shaved 1.3 percentage points (pp) from growth, as a surge in imports (+21.1%) was only partly offset by a solid gain in exports (13.1%). Most of the gain in imports was driven by a pick-up in goods. Inventory investment added a modest 0.1pp (down from the advanced estimate’s 0.4pp contribution) to Q1 GDP.
Final sales to private domestic purchasers, a better gauge of underlying demand as it includes only household consumption and fixed investment rose by a healthy 2.4%, an acceleration from Q4’s gain of 1.8%.
Real Gross Domestic Income (GDI) – an alternative measure of economic output – rose 0.9% after rising a similar 1.6% in Q4-2025. Corporate profits were up a modest 3.8% (annualized) or $40.4 billion (unannualized) after accounting for inventory valuation and capital consumption adjustments. Personal income was up 3.3%, led by decent growth in employee compensation (+3.2%) and personal income receipts on assets (+3.9%).
Key Implications
The second estimate of Q1 real GDP did little to change the underlying narrative. The U.S. economy remained resilient through the first three-months of the year, with growth improving after a sluggish end to 2025. In part, the uptick was driven by a rebound from Q4’s sharp decline in federal outlays, stemming from the record-long government shutdown. Business investment remained a bright spot, with gains driven by further investments in AI and some broadening in capital expenditures to non-AI driven expenditures.
Consumer spending was a soft spot in Q1 (as evidenced by the further downgrade in this morning’s second estimate), though that appears to be largely related to a series of weather-related events that caused widespread disruptions from the Northeast down to the South through late-January and early-February. Spending has since rebounded and has (so far) remained reasonably resilient through the first few months of the energy shock, in part due to higher tax refunds which have provided households some cushion to absorb the jump in energy costs. We see the economy expanding around a 2% pace in Q2, aided by continued investments in AI and moderate growth in consumer spending.
Editorial note: This recovered market brief has been cleaned and reclassified by Next Move Markets for educational market intelligence. It is not investment advice.
Next Move Markets desk view
For active traders, this brief should be read through the lens of global markets rather than as a standalone headline. The key question is whether the theme behind U.S. Economy Expands by 1.6% in Q1 can influence positioning beyond the first reaction. That means watching liquidity, macro data, sentiment, positioning and cross-asset confirmation together, not in isolation.
A richer trading read comes from separating the catalyst from confirmation. The catalyst explains why markets are paying attention; confirmation comes from price action, liquidity and cross-asset behavior after the headline is digested. If those signals do not align, traders should treat the move as fragile and keep risk tighter.
What traders should watch next
- Whether price action confirms the headline after the first reaction has passed.
- How related markets respond, because isolated moves are easier to reverse.
- Any follow-up data or official comment that changes the original market assumption.
- Volatility and liquidity conditions, which should guide risk size before direction.
Risk context
This article is a market-intelligence brief, not a trade recommendation. Before acting on the theme, traders should define invalidation, position size and the time horizon of the setup. The same headline can support a short-term reaction and still fail as a multi-session trend if liquidity, policy expectations or broader sentiment move the other way.
Scenario map
The base case is that traders keep this theme on the radar while waiting for confirmation from liquidity, macro data, sentiment, positioning and cross-asset confirmation. A stronger continuation scenario requires follow-through after the first reaction, preferably with related assets moving in the same direction. A failure scenario develops if the headline is quickly absorbed, volatility fades and price returns inside the previous range.
For global markets, the most useful approach is to compare the article theme with live market behavior. If the market confirms the narrative, pullbacks can become more constructive. If the market rejects it, the headline becomes background noise rather than a trading driver.
Execution discipline
- Define the level first: traders should know where the idea is invalidated before thinking about upside or downside.
- Separate news from setup: U.S. Economy Expands by 1.6% in Q1 may explain attention, but entry quality still depends on timing, liquidity and risk/reward.
- Watch confirmation: a clean move usually appears across related markets, not only in one isolated instrument.
- Control exposure: if volatility expands, smaller position sizing can be more professional than chasing the headline.
Next Move Markets treats this kind of brief as a starting point for preparation: identify the driver, map the scenarios, then wait for the market to prove which path is actually being priced.
Next Move Markets desk view
For active traders, this brief should be read through the lens of global markets rather than as a standalone headline. The key question is whether the theme behind U.S. Economy Expands by 1.6% in Q1 can influence positioning beyond the first reaction. That means watching liquidity, macro data, sentiment, positioning and cross-asset confirmation together, not in isolation.
A richer trading read comes from separating the catalyst from confirmation. The catalyst explains why markets are paying attention; confirmation comes from price action, liquidity and cross-asset behavior after the headline is digested. If those signals do not align, traders should treat the move as fragile and keep risk tighter.
What traders should watch next
- Whether price action confirms the headline after the first reaction has passed.
- How related markets respond, because isolated moves are easier to reverse.
- Any follow-up data or official comment that changes the original market assumption.
- Volatility and liquidity conditions, which should guide risk size before direction.
Risk context
This article is a market-intelligence brief, not a trade recommendation. Before acting on the theme, traders should define invalidation, position size and the time horizon of the setup. The same headline can support a short-term reaction and still fail as a multi-session trend if liquidity, policy expectations or broader sentiment move the other way.
Scenario map
The base case is that traders keep this theme on the radar while waiting for confirmation from liquidity, macro data, sentiment, positioning and cross-asset confirmation. A stronger continuation scenario requires follow-through after the first reaction, preferably with related assets moving in the same direction. A failure scenario develops if the headline is quickly absorbed, volatility fades and price returns inside the previous range.
For global markets, the most useful approach is to compare the article theme with live market behavior. If the market confirms the narrative, pullbacks can become more constructive. If the market rejects it, the headline becomes background noise rather than a trading driver.
Execution discipline
- Define the level first: traders should know where the idea is invalidated before thinking about upside or downside.
- Separate news from setup: U.S. Economy Expands by 1.6% in Q1 may explain attention, but entry quality still depends on timing, liquidity and risk/reward.
- Watch confirmation: a clean move usually appears across related markets, not only in one isolated instrument.
- Control exposure: if volatility expands, smaller position sizing can be more professional than chasing the headline.
Next Move Markets treats this kind of brief as a starting point for preparation: identify the driver, map the scenarios, then wait for the market to prove which path is actually being priced.
