The U.S. economy received an upside surprise in the third and final estimate of GDP for the first quarter of 2026. In nominal (not adjusted for inflation) terms, the nation's GDP reached $31.866 trillion after growing by an annualized rate of 5.76% over the previous quarter. The actual year-over-year increase in nominal GDP is 6.07%.
That's $361.7 billion (or 1.1%) higher than had been forecast by the climbing limo GDP forecasting method nearly three quarters ago, which we anticipated would understate the economy's growth.
Reports indicate business investments in Artificial Intelligence (AI) technology are responsible for the outperformance:
The most striking feature of the Q1 data is not its size but its composition. Business investment jumped 10.6% in the first quarter, a sharp acceleration from the 2.4% recorded in Q4 2025. Nearly all of that increase was concentrated in information processing equipment — computers, servers, and the physical infrastructure powering the artificial intelligence buildout — along with software and research and development spending.
Analyst estimates based on BEA sub-component data suggest that AI-related investment contributed roughly three-quarters of the quarter’s total GDP growth. The information sector, federal government spending, professional and scientific services, and durable goods manufacturing were the leading industry contributors. Meanwhile, retail trade, wholesale trade, and finance and insurance all declined.
Looking forward, the climbing limo GDP forecasting method anticipates nominal GDP will continue rising in 2026-Q2, reaching around $32.75 trillion. The following chart shows how actual non-inflation adjusted GDP estimates are tracking with the model's previous projections:
This estimate assumes the momentum the U.S. economy recorded in growing between 2025-Q1 and 2025-Q3 will be sustained through the ending calendar quarter of 2026-Q2. Given the momentum of actual GDP and the impact of the Iran war geopolitical event that wasn't a factor influencing the projection of GDP at the time of the model's momentum-based forecast, we think the climbing limo's projection of nominal GDP in 2026-Q2 will overstated.
The most distant future projection we can make with available finalized GDP data is for 2026-Q4, where the climbing limo forecasting method anticipates the nation's nominal GDP will end the year around $33.05 trillion.
References
U.S. Bureau of Economic Analysis. National Income and Product Accounts. Table 1.1.5. Gross Domestic Product. [Online Database]. Accessed 25 June 2026.
Image Credit: Microsoft Copilot Designer. Prompt: "A chart showing a limousine driving up a bumpy GDP trajectory that rises over time".
Labels: gdp, gdp forecast
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