Major US Data Releases: GDP and PCE

Tonight at 20:30 Beijing time, the United States will announce the GDP data for the first quarter. The market expects an annualized growth rate of 2.3%, which seems solid on the surface, but a closer look at the composition paints a much less optimistic picture—consumer spending is only expected to increase by 1.4%, and what truly props up these results are government spending rebounds and corporate AI investments.

At the end of 2025, the United States experienced the longest government shutdown in history, with the interruption of public services and over a million employees furloughed without pay, causing a loss of approximately one percentage point in the fourth quarter GDP—this drag was released in the first quarter.

JPMorgan economist Abiel Reinhart estimates that, excluding the stimulus effect brought about by the end of the shutdown, the actual growth rate for the first quarter may only be around 1.5%.

AI investment is another supporting force, but its net contribution is significantly diluted. The heavy reliance on imported hardware components results in a trade deficit that offsets it in GDP accounting. At the same time, following the Supreme Court's overturning of some tariff policies in February, companies have been stockpiling inventories before new tariffs take effect, further widening the trade deficit.

The GDPNow model of the Atlanta Fed shows that net exports alone may drag down the growth rate by about 1.3 percentage points.

Perhaps the more significant figure to watch tonight alongside the GDP data is the March PCE Price Index (the Federal Reserve's most important inflation indicator).

The market expects the overall PCE year-on-year increase to rise to 3.5%, the fastest since 2023; the core PCE is expected at 3.2%. The conflict in Iran driving up energy prices is the main driver, with record surges in gasoline prices in March and continuing into April.

Goldman Sachs has revised its full-year inflation forecast, currently expecting the core PCE to rise by 2.6% year-on-year by December, and the overall PCE to reach 3.4%, both higher than previous forecasts.

Its model estimates that energy and commodity price increases in the Gulf region will further raise the core PCE by about 0.35 percentage points and the overall PCE by about 1.25 percentage points in 2026. The institution also forecasts that Brent crude prices will remain around $100 in April and May, with the risk of oil prices leaning towards the upside, and that oil flow through the Strait of Hormuz may not fully normalize until the end of June.

RSM US Chief Economist Joe Brusuelas pointed out that the GDP boost from defense spending has not been fully reflected in the first quarter data yet, and a more significant impact will be evident in government spending in the second and third quarters.

Bloomberg economist Eliza Winger, on the other hand, outrightly stated that the growth rebound in the first quarter is more of a mechanical correction from last year's shutdown drag, with underlying demand still weak.

After tonight's data release, the core issue that the market is focused on is whether the March core PCE can confirm that the stubborn inflation that existed before the conflict is ongoing, and whether the fatigue in consumer spending has already substantially dragged down domestic demand. The answers to these two questions will directly affect the market pricing of the Fed's subsequent interest rate path.