Most quarters, the Q1 GDP print is just a number that confirms what investors already feel. This one is different. It is the first official look at how much the Iran war has dragged on the U.S. economy in real time.
The early read: government spending is the only thing keeping growth positive.
Bloomberg's economist survey expects Q1 GDP to grow at a 2.3% annualized pace. Consumer spending, which usually drives most of U.S. growth, is on track to come in at just 1.4%. Inside the consumer line, goods spending is expected to be close to flat, with healthcare doing most of the work in personal consumption.
Some sources point to a sharper deceleration to as low as 0.5% annualized. The wider range reflects how unsettled the data is right now, with war-related disruptions still feeding through the economy.
Most of the quarter's gains are tied to government spending. Federal outlays climbed because of recovery work tied to the late-2025 government shutdown and direct war-related expenditures.
That is not the kind of growth investors usually want to see leading a quarter. It can mask weakness elsewhere, and the underlying picture in the Q1 forecasts is consistent. Trade is weakening, exports are falling, and consumer demand looks soft outside of healthcare.
S&P Global Ratings, in its Q1 outlook, called the U.S. economy "steady as she goes, but on a narrow path." That narrow path is the part investors should watch.
The Fed has spent months trying to figure out whether the war's spike in oil prices will cool quickly or settle into the broader inflation picture. A Q1 report that confirms a sharp consumer slowdown gives the Fed cover to cut rates if energy prices roll over later in the year. A surprisingly resilient consumer line could push rate cuts further out.
This is the first GDP read since the U.S. began combat operations in Iran in late February. The drivers underneath the headline number, especially government spending versus the consumer, will tell investors more than the top-line print itself. The next data point is the May 1 release of the actual GDP number, with the consumer breakdown in the underlying tables.