The economy expanded at a 1.6% annualized pace, below earlier estimates, while corporate profits posted their strongest yearly rise since 2021.
The U.S. economy grew more slowly than first reported in the opening months of the year, underscoring a more cautious start to 2026 as consumer spending and business inventories proved weaker than previously estimated.
Gross domestic product expanded at a 1.6% annualized rate in the first quarter, according to revised government data, down from an earlier estimate of 2.0%. The downgrade suggests that while the economy continued to grow, momentum was less robust than initial figures had indicated.
The revision was largely driven by softer inventory investment and a weaker reading on consumer spending. Household consumption, a central engine of the U.S. economy, was revised down to a 1.4% growth rate, signaling that Americans may be becoming more selective in their spending after a long period of elevated prices and high borrowing costs.
Despite the slower headline figure, the report was not uniformly negative. Business investment remained a bright spot, particularly spending on equipment, which continued to expand strongly. Analysts have pointed to technology-related investment, including artificial intelligence infrastructure and corporate digital upgrades, as an important source of support for the broader economy.
Corporate profits also delivered a notable contrast to the softer GDP reading. Profits rose sharply from a year earlier, marking the strongest annual increase since late 2021. That resilience suggests that many companies have continued to protect margins even as consumers face tighter budgets and the pace of overall growth moderates.
The mixed data complicates the economic picture for policymakers and investors. On one side, slower growth could ease concerns that the economy is overheating. On the other, firm profits and continued business investment indicate that corporate America remains relatively strong.
For the Federal Reserve, the report adds another layer to an already delicate policy environment. Officials are weighing signs of cooling demand against persistent inflation pressures, while markets continue to assess when interest-rate cuts might become more likely.
The first-quarter revision does not point to a downturn, but it does suggest a more uneven economy: households are showing signs of fatigue, businesses remain willing to invest, and corporate profits are still rising. The result is an expansion that continues, but with less speed and more uncertainty than previously believed.
