US economic growth reaccelerates in Q1 2026

What happened: U.S. economic growth accelerated in Q1 2026, rising at an annualized rate of 2.0%, up from 0.5% in Q4 2025, according to the Bureau of Economic Analysis. This rebound was driven by a recovery in government spending following a government shutdown. However, consumer spending, which accounts for over two-thirds of U.S. economic activity, likely cooled.

Market impact: The acceleration in GDP growth positively impacted sectors sensitive to economic cycles, such as industrials and materials. However, the slowdown in consumer spending may dampen optimism in retail and consumer discretionary stocks. Companies like Walmart and Target, which are sensitive to consumer spending, may see reduced demand.

What to watch next: Investors should closely monitor the upcoming Personal Consumption Expenditures (PCE) and Consumer Confidence Index releases to gauge the extent of the consumer spending slowdown. Additionally, the next GDP print in late July will provide further clarity on the sustainability of the economic growth acceleration.