U.S. Economy Falls Short of Forecasts

(MENAFN) The US economy expanded at an annualized rate of 1.6% in the first quarter of the year, falling short of analyst expectations, according to revised figures published Thursday by the Commerce Department.

The agency's second GDP estimate revealed the economy grew more slowly than the 2% pace projected in its preliminary reading released last month. The shortfall raises fresh concerns about the underlying momentum of the world's largest economy heading into the second half of the year.

The latest figure follows modest growth of 0.5% recorded in the final quarter of 2025, though the economy posted a healthier overall expansion of 2.1% for the full year.

Growth in the January–March period was supported by gains across exports, business investment, consumer spending, and government outlays. However, a surge in imports — which weigh negatively on GDP calculations — acted as a significant drag on the headline figure.

Inflation Alarm: Strongest Price Surge Since 2022
On the inflation front, the data painted a troubling picture. The personal consumption expenditures (PCE) price index — the Federal Reserve's preferred measure of inflation — climbed 4.5% in the first quarter, unchanged from the preliminary estimate and marking the sharpest quarterly increase since the third quarter of 2022. That compares to a 2.9% rise in the prior quarter.

Core PCE — which strips out volatile food and energy prices — was revised upward to 4.4% from an initial reading of 4.3%, registering its steepest quarterly rise since the first quarter of 2023, following a 2.7% increase the previous quarter.

The combination of slowing growth and accelerating inflation is likely to intensify scrutiny on the Federal Reserve as policymakers navigate an increasingly delicate economic environment.

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