Business Investment Led GDP Growth in First Quarter of 2026

By SBE Council at 1 May, 2026, 10:14 am

by Raymond J. Keating –

The are a few notable takeaways from the initial estimate of real economic growth for the first quarter of 2026. Topping the list, however, is that real GDP growth came in at an under-performing 2.0 percent rate (seasonally adjusted and annualized). Next was the fact that business investment led the economic growth that was achieved.

As for 2.0 percent real growth, while not meeting general market expectations in this particular case, the reality is that political, media and many economist circles have come to adopt diminished expectations regarding economic growth. It’s far from rare to hear the argument that 2.0 percent growth is solid. Let’s be clear: It’s not. There’s no reason why the U.S. economy today cannot manage to grow at an average real rate of better than 3 percent, as was the norm for most of the post-WWII era, including into the earliest years of the 21st century.

Fourth quarter 2025 real growth of 0.5 percent followed by 2.0 percent is nothing to celebrate. Indeed, the only real positive to be found here is the fact the Iran war started in the third month of this year’s first quarter, and therefore, the private sector deserves kudos for its ability to crank out any kind of growth.

With a slowdown in real personal consumption expenditures (from 3.5 percent in the third quarter 2025 to 1.9 percent in the fourth quarter and 1.6 percent in the first quarter 2026), when one looks at the contributions to 2.0 percent growth rate in the first quarter, business investment really was the key – specifically, tech-related investment.

Consider that 1.39 percentage points of growth came from fixed nonresidential investment – that is, business investment. Within this, information processing equipment accounted for 0.83 percentage points of our 2.0 percent growth rate, and software accounted for 0.51 percentage points. Again, this is about technology investment.

It’s also worth noting that the wild roller coaster ride that is U.S. trade turned upward in the first quarter, with real exports up by 12.0 percent and imports spiking by 21.4 percent. But it’s hard to get too excited about these numbers given wild fluctuations and uncertainties.

Two percent growth in the first quarter 2026, once again, is far from good news, but it does speak to the resiliency of American entrepreneurs, businesses, workers and investors. And right now, the growth we’re seeing is tied extensively to high-tech.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of “The Weekly Economist” book series, and 10 Points from Walt Disney on Entrepreneurship.