U.S. inflation rises while economic growth slows in first quarter

14:15

The United States economy showed mixed signals at the end of the first quarter of 2026, as inflation continued to rise while economic growth slowed more than expected. The latest economic indicators released on Thursday highlighted ongoing pressure on consumers and businesses, even as financial markets reacted calmly to the data.

According to updated estimates from the U.S. Commerce Department, the country’s gross domestic product (GDP) grew at an annual rate of 1.6% during the first quarter of the year. This figure was revised downward from the previously reported 2.0%, reflecting weaker consumer spending and lower inventory investment.

Economists had largely expected the earlier estimate to remain unchanged, making the downgrade a sign that the American economy may be losing momentum after stronger performances in previous quarters. Consumer spending, which remains one of the main drivers of U.S. economic activity, appeared to slow as households faced higher prices and tighter financial conditions.

At the same time, inflation continued to accelerate. The Personal Consumption Expenditures (PCE) price index, one of the Federal Reserve’s preferred measures of inflation, increased by 3.8% in April compared with the same period last year. This marked the strongest annual increase since May 2023.

On a monthly basis, the PCE index rose by 0.4% in April following a sharp 0.7% increase in March. Excluding food and energy prices, the core PCE inflation index climbed 3.3% year-on-year, slightly above the previous month’s level.

Despite the rise in inflation, the figures were generally in line with market expectations, helping avoid major volatility on Wall Street at the opening of trading. Investors continue to closely monitor economic data for signals about the future direction of U.S. interest rates and possible decisions by the Federal Reserve.

Analysts believe the combination of slowing growth and persistent inflation could complicate monetary policy in the coming months. While inflation remains above the central bank’s target, weaker economic growth may increase concerns about the pace of the economy and consumer confidence.

The new data reflects the delicate balance facing policymakers as they attempt to control inflation without pushing the economy into a sharper slowdown.