Diving overview:
- U.S. economic growth rebounded in the first three months of 2026, expanding at an annual rate of 2% as companies injected record levels of investment into artificial intelligence.
- Business expenditures on equipment and structures It rose 10.4% in the first quarter.the most robust rate From Q2 2023 onwardsThe Bureau of Economic Analysis announced Thursday. Consumers shrugged off soaring gas prices in March, the first full month of the Iran war, and increased their spending by 1.6% in the first quarter, according to the BEA.
- Joe Brusuelas, chief U.S. economist at RSM, said future economic growth depends on the duration of the Iran war. ““If the war continues, we can expect further increases in oil prices and a decline in the supply of refined products, which will have a major impact on the real economy and thus on stock valuations,” he said in a note.
Dive Insight:
artificial intelligence It contributed 0.97 percentage points to GDP growth in the first three quarters of 2025, outpacing the 0.81 percentage point increase in GDP from technology investment in 2025. Expenses for introducing the Internet in 2000, according to the Federal Reserve Bank of St. Louis.
spending around the world Total AI value predicted to be $2.52 trillion According to Gartner, it will increase by 44% year over year in 2026. Amazon, Google, Microsoft and Meta this week reported increased spending on data centers and other technologies essential to AI.
Economists say AI’s boost to economic growth may not be able to offset the effects of the lingering Middle East conflict.
“It won’t take long for a war in Iran to trigger a recession, in part because the odds of a recession were already uncomfortably high before the war broke out,” Mark Zandi, chief economist at Moody’s Analytics, said Thursday, noting that the probability of a recession over the next 12 months is now significantly higher. It remains at around 40% From the beginning of 2026.
“Behind the already high odds is a weak job market and struggling housing activity,” he said in a LinkedIn post. “Economies are vulnerable when something goes wrong, and the Iran war is exactly that.”
If the Strait of Hormuz blockade is not ended, a large portion of consumer spending will likely shift to spending on gasoline, reducing demand for services and other goods and slowing economic growth. Consumer spending will support about two-thirds of the growth.
The average price of a gallon of gasoline is Approximately 44% increase Since American and Israeli fighter jets were launched attack on iran According to AAA, it went from $2.98 on Feb. 28 to $4.30 on Thursday.
Even if the Iran war is resolved in the coming weeks, economic growth will likely be below potential and the unemployment rate will rise from 4.3% in March, Zandi predicted.
Rising energy prices will complicate Fed policymakers’ efforts to keep inflation at their 2% target.
The Federal Reserve’s recommended inflation measure, the Personal Consumption Expenditure Price Index, which excludes volatile food and energy prices, rose 0.3% in March; 3.2% per annumBEA announced on Thursday. so-called core PCE The last time it grew faster was in November 2023.
Federal Reserve Chairman Jerome Powell said Wednesday that the U.S. economy is performing well so far despite the supply shock caused by soaring energy prices.
“The U.S. economy is expanding at a solid pace,” Powell said at a news conference after policymakers decided to keep the federal funds rate unchanged at a range of 3.5% to 3.75%.
Still, Powell said, “The economic outlook remains highly uncertain, and the Middle East conflict is adding to this uncertainty in the near term.”
“Rising energy prices will push up overall inflation,” he predicted, adding: “Moreover, the extent and duration of the potential economic impact remains uncertain, and the future fate of the conflict itself is uncertain.”
