The US economy expanded at an annualized rate of 1.6% in the first quarter of 2026, down from an initial estimate of 2.0%, the US Commerce Department reported on May 28, 2026 [1, 2, 3]. Despite the downward revision, the growth rate accelerated from 0.5% in the fourth quarter of 2025 [1, 2]. The agency said the revision reflected lower than expected investment and consumer spending, with real GDP dropping 0.4 percentage point from the advance estimate primarily because of these factors [2]. Consumer spending growth was revised down to 1.4% from 1.6% [1, 4]. Meanwhile, business spending on equipment held steady at a strong 17.2% pace in Q1 [1].
Inflation pressures are mounting in the US economy. The Personal Consumption Expendures (PCE) price index rose 3.8% year-on-year in April 2026, the highest increase since 2023, while the core PCE index, which excludes food and energy, increased 3.3% year-on-year [3, 4]. Higher energy costs resulting from the ongoing Middle East conflict, including US-Israeli air strikes on Iran on February 28 and Iran's blockade of the Strait of Hormuz, have contributed to inflation and weakened consumer purchasing power [2, 5, 6].
Profits from current production slowed sharply to a $40.4 billion annual rate in Q1 2026, down from $246.9 billion in the previous quarter [1]. The Commerce Department noted that the decline in profits and consumer spending weighed on overall economic growth [2].
Elsewhere, Taiwan’s government raised its 2026 GDP growth forecast to 9.64%, driven by strong demand for artificial intelligence and semiconductor exports. Taiwan’s economy grew 14.55% in the first quarter, revised up from an earlier estimate of 13.69%, and merchandise exports are expected to increase 39.77% this year, the largest growth in 50 years [7, 8, 9]. Chen Shu-Tzu, chief of Taiwan’s Directorate General of Budget, Accounting and Statistics, said the economy’s sharp expansion shows "domestic economic growth momentum is very strong" despite last year’s high base [9].
In Europe, France’s GDP contracted 0.1% in the first quarter of 2026, lower than the prior estimate of zero growth, reflecting weakness in household consumption and exports. French household consumption declined 0.2% quarter-on-quarter, exports fell 3.5%, and inflation rose 2.4% year-on-year in May [10].
The US government will next release second-quarter GDP data in late July, providing a further update on the economy’s trajectory amid inflation concerns.
