Monthly Economic Headlines

U.S. GDP rebounds, led by investment and consumer spending.

Gross domestic product rose at a 2% annualized rate in Q1, up from 0.5% in Q4, according to the Commerce Department. Consumer spending accounted for about two-thirds of growth, with services up 1.6% annualized and business investment climbing. Exports and government outlays also contributed, as the economy entered the Iran conflict on solid footing.

AI-driven investment supports business growth.

Business investment in equipment and software jumped 10.4% annualized in Q1, the highest rate since mid-2023. Economists attribute this strength to continued expansion in artificial intelligence infrastructure, which is helping offset weaker investment in other sectors.

Energy prices climb, fueling inflation and impacting CPI.

Oil prices remain above $100 per barrel, pushing U.S. gasoline prices higher and raising costs for households and businesses. Economists note a strong correlation between energy prices and the Consumer Price Index (CPI), with the current supply shock contributing to elevated inflation readings. The International Energy Agency warns that the Iran conflict has triggered the largest disruption in the history of the global oil market, with global oil supply plunging by about 10.1 million barrels per day in March. Economists also note that persistent high energy prices could erode discretionary consumer spending, a core driver of GDP.

Fed holds rates steady as Powell departs.

The Federal Reserve kept interest rates unchanged, marking the most dissents since 1992, and cited resilience in the economy despite new inflation risks from energy markets and low job growth. Three regional Fed Presidents (Hammack, Kashkari, and Logan) voted against the inclusion of an easing bias in the post-meeting statement, signaling they believe rate hikes are now as likely as cuts. Fed Governor Miran, the vocal proponent for lower rates, dissented in favor of a 25bp cut. Outgoing Chair Jerome Powell expects growth to remain above 2% and emphasized the Fed’s commitment to bringing inflation back toward target as tariff-driven goods inflation is fading, however, energy-related price shocks could complicate the inflation path in the coming months.

Inflation and Oil Prices

Source: US Energy Administration Information; Bureau of Labor Statistics

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