Why This Matters to Distributors: Stronger economic growth and business investment support demand for industrial products and capital equipment, but wholesale trade’s continued decline underscores the uneven recovery many distributors continue to navigate.
The U.S. economy expanded at a faster pace than previously estimated during the first quarter, driven by stronger business investment, exports and government spending, although wholesale trade remained one of the largest drags on economic growth, according to revised data released Thursday by the U.S. Bureau of Economic Analysis.
Real gross domestic product increased at an annual rate of 2.1% during the January-through-March period, up from the agency’s previous estimate of 1.6% and accelerating from 0.5% growth in the fourth quarter of 2025. The revision primarily reflected lower imports than previously estimated, which boosted GDP because imports are subtracted from economic output calculations, partially offset by weaker consumer spending.
The report points to continued strength in business investment and manufacturing while highlighting ongoing challenges for distributors. Among major industries, wholesale trade, retail trade, and finance and insurance posted the largest negative contributions to first-quarter GDP, offsetting gains elsewhere in the economy.
Private goods-producing industries grew 4.5%, while government expanded 7.5% and private services-producing industries increased 0.8%. Information, federal government, professional, scientific and technical services, and durable goods manufacturing were the largest contributors to economic growth.
For distributors, the report reflects a mixed operating environment. Strong capital investment and manufacturing activity continue to support demand for industrial products, technology and equipment, but weakness in wholesale trade suggests many distributors are still contending with cautious customer spending, inventory normalization and uneven order patterns.
Corporate profits increased $74.4 billion during the quarter, an upward revision of $34.0 billion from the previous estimate. Real gross domestic income increased 1.2%, while the average of GDP and gross domestic income rose 1.7%, indicating underlying economic activity remained positive.
Inflation remained elevated. The price index for gross domestic purchases increased 3.6% in the first quarter, while the Personal Consumption Expenditures price index rose 4.6%. Core PCE, which excludes food and energy, increased 4.4%, unchanged from the previous estimate.
Regionally, real GDP increased in 46 states and the District of Columbia. Washington posted the strongest growth at an annualized 4.5%, led by the information sector, while South Dakota recorded the largest decline at 1.6%. Personal income increased 3.4% nationally and rose in 49 states and the District of Columbia.
The Bureau of Economic Analysis will release its advance estimate of second-quarter GDP on July 30, providing the next indication of whether business investment and manufacturing momentum carried into the spring.
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