- Lead. The United States economy grew at a 2.1% annualised rate in the first quarter of 2026 — a sharp turnaround from the 0.5% crawl recorded in the final quarter of 2025 — according to the Bureau of Economic Analysis third estimate released on June 25.
- Fact. The rebound was broad-based, driven by increases across investment, exports, government spending and consumer spending, though a simultaneous rise in imports partially offset the gains.
- Stake. The positive headline sits in uncomfortable tension with a sharp drop in corporate confidence: a Conference Board survey of 141 CEOs published this month found that 47% say the economy is already worse than it was six months ago, and 31% plan to reduce their workforce in the coming two quarters.
The BEA’s third and final estimate for Q1 2026, released June 25, confirmed annualised GDP growth of 2.1% — the strongest quarterly print since mid-2025. The reading reverses a marked slowdown: Q4 2025 had expanded at just 0.5%, a period economists attributed partly to front-loaded tariff effects and mounting uncertainty around the Middle East conflict.
What drove the rebound
The BEA attributed first-quarter growth to broad gains across investment, exports, government spending and consumer spending. Imports also rose during the period, which subtracts from the headline figure but reflects underlying domestic demand. The picture is one of an economy that entered 2026 with more momentum than the end of 2025 suggested.
For context, the Federal Reserve is watching closely. Chair Kevin Warsh held interest rates at their current level at the June meeting and removed forward guidance from the post-meeting statement — a hawkish signal that acknowledges the inflation risk posed by energy prices. As reported here after the June FOMC decision, nine of Warsh’s colleagues on the committee see a rate hike as appropriate before year-end. A 2.1% growth figure does nothing to dampen that inclination.
Corporate confidence tells a different story
The backward-looking GDP figure sits in tension with forward-looking corporate surveys. The Conference Board Measure of CEO Confidence fell to 47 in Q2 2026, down from 59 in Q1. Any reading below 50 signals that negative outlooks outnumber positive ones. Of the 141 chief executives surveyed, 47% said the economy is materially worse than it was six months ago, up from 8% who felt that way in Q1. Fully 40% expect conditions to weaken further over the next two quarters.
Plans are adjusting accordingly: 31% of surveyed executives said they expect to reduce their workforce over the next six months, now outpacing the 28% who plan to expand hiring — a reversal from recent quarters. EY-Parthenon chief economist Gregory Daco has described the outlook as facing “higher inflation, weaker real disposable income growth, and tighter financial conditions,” driven in part by the Middle East energy shock. That shock is already visible in price data: the Fed’s preferred measure of inflation hit 4.1% in May, the highest since April 2023.
The combination — solid Q1 growth numbers landing just as Q2 indicators soften — will set the terms for the Federal Reserve’s autumn deliberations on whether the economy is strong enough to absorb rate increases designed to push that 4.1% figure back toward its 2% target.