(TNND) — The American economy rebounded from fairly flat growth at the end of last year to record a moderate increase to start this year, according to a new U.S. Bureau of Economic Analysis report.
But economic experts expressed concern about the composition of the growth, dominated by government spending and the information sector, and marked by softer consumer spending.
The BEA published its third estimate of first-quarter gross domestic product, showing annualized growth of 2.1%.
That compared to growth of just 0.5% in the fourth quarter of last year, amid a record-long government shutdown, and an economic contraction in the first quarter of 2025.
The BEA releases several estimates of GDP each quarter, with reports becoming more accurate as additional data comes along. Between the advance estimate released at the end of April and the update released Thursday, little changed in the headline GDP figure. The advance estimate showed annual growth at 2%, the second estimate downgraded growth to 1.6%, and the latest estimate bumped it back up to 2.1%.
GDP is the main proxy for national economic growth, officially a measure of the total value of goods and services produced by Americans.
Consumer spending accounts for over two-thirds of GDP, but the latest report showed a downward revision to consumer spending.
The other components of GDP are business spending, government spending and net exports.
The initial estimate for second-quarter GDP will be released at the end of July.
Odysseas Papadimitriou, the founder and CEO of the personal finance site WalletHub, said 2.1% growth in the first quarter was “good” but “not great.”
“It’s not bad. It’s OK,” he said.
Papadimitriou said it’s an improvement over the previous quarter, but he said the American people would be better served with less volatility within quarter-to-quarter economic growth.
Meanwhile, another government report showed inflation jumped to a three-year high last month. Prices climbed 4.1% in May, according to the personal consumption expenditures price index.
“You can have economic growth, but if there is also inflation, people are not seeing the benefits in their pockets,” Papadimitriou said.
A person pumps gas at a gas station June 25, 2026, in Austin, Texas. (Photo by Brandon Bell/Getty Images)
Business professor Jay Zagorsky said the 2.1% GDP growth falls short of President Donald Trump’s goal of 3% growth.
And Zagorsky said he’s worried about how “lopsided” the growth within the GDP was over the first quarter.
“Much of the growth came from information, building AI data centers, and the federal government,” said Zagorsky, a professor with the Questrom School of Business at Boston University.
Zagorsky said more broad-based growth would be better for the economy.
Mark Hamrick, an economic analyst and the founder of The Hamrick Brief, pointed out that business investment jumped 10.6% in the first quarter, up from just 2.4% at the end of last year. And almost all of that came from the artificial intelligence build-out, he said.
Hamrick also pointed to a St. Louis Fed report from earlier this year that showed AI-related spending accounted for roughly 39% of all U.S. economic growth through the first three quarters of last year.
“The economy is still growing, and the AI wave is real; in time, it could lift productivity and wages broadly. But growth that leans this hard on one engine, while so many households run closer to the edge, has less margin for error,” he wrote in a blog entry Thursday.
“Professional, scientific, and technical services” and “durable goods manufacturing” joined “information” and the “federal government” as leading industry contributors to the increase in real GDP.
The leading drags to GDP were decreases in “retail trade,” “wholesale trade,” and “finance and insurance.”
“You never want federal government spending to be a key driver of real GDP, especially when the government is funded by debt,” Papadimitriou said.
Papadimitriou also raised concerns over the health care industry serving as a key driver of economic growth, flagging affordability and access challenges for Americans.
“I think consumers’ wallets are coming to their limits, and there is not much more that they can sustain in an inflationary environment. … In a consumer-driven economy like the U.S., consumer spending going down is a huge concern,” Papadimitriou said.
Papadimitriou said Americans might be smart to cut unnecessary expenses, given “significant uncertainties” facing consumers, including multiple potential triggers for a recession in the coming years. One of those, Papadimitriou said, is the potential of the AI bubble bursting at some point.
