The U.S. economy expanded at a solid and unexpected 2.1% annual pace from January through March, but the numbers also show who gets squeezed when the machinery of growth runs hot: consumers, renters, borrowers, and workers facing higher prices and tighter budgets. The Commerce Department said in its final estimate of first-quarter growth that business investment surged, likely because of an investment boom in artificial intelligence, while consumer spending, which accounts for around 70% of U.S. economic activity, fell sharply from fourth-quarter 2025 and from Commerce’s previous estimate.
Who Pays for the Boom
The report said that decline suggested consumers may be cutting back in the face of higher gasoline prices caused by the war with Iran. That is the familiar arrangement: decisions made far above ordinary people show up later as higher costs at the pump and less room in household budgets. The same report said the increase in gross domestic product marked a rebound from 0.5% growth in the last three months of 2025, when a 43-day federal government shutdown weighed on the economy, and was an upgrade from Commerce’s previous first-quarter estimate of 1.6% growth.
The Federal Reserve’s preferred inflation gauge rose to a new three-year high in May as gas prices peaked. Consumer prices rose 4.1% in May from a year earlier, the Commerce Department said Thursday, the largest annual increase since April 2023. On a monthly basis, inflation was 0.4% last month, matching April’s increase and down from 0.7% in March. The increase was largely driven by more expensive gas, as well as pricier semiconductors and other computer equipment that are in high demand for the AI buildout.
What the Market Calls Growth
Apple announced price increases for Macs and iPads, citing a memory chip shortage brought on by the artificial intelligence boom. The company called the demand spike an “unprecedented challenge” for the consumer electronics industry and said, “We have never seen a component price increase this much, this quickly.” The new, entry-level MacBook Neo will now cost $699, up from $599. The 512 gigabyte MacBook Air now costs $1,299, up from $1,099. The one terabyte MacBook Pro is $1,999, up from $1,699. The 128 gigabyte iPad Air is now $749, up from $599, while the 256 gigabyte iPad Pro Wifi is now $1,199, up from $999.
Those price hikes land on buyers, not on the executives or investors riding the AI wave. The report ties the surge in business investment to that boom, while the public faces the bill in the form of pricier semiconductors, other computer equipment, and higher sticker prices on consumer devices.
Borrowing Costs and Job Insecurity
The average long-term U.S. mortgage rate edged higher this week, staying close to 6.5%, where it has been the last six weeks. The benchmark 30-year fixed-rate mortgage rose to 6.49% from 6.47% last week, Freddie Mac said Thursday. One year ago, the average rate was 6.77%. Borrowing costs on 15-year fixed-rate mortgages also rose to 5.84% from 5.81% last week; a year ago, it was 5.89%.
Fewer Americans applied for jobless aid last week as layoffs remained low despite economic headwinds. U.S. applications for unemployment benefits in the week ending June 20 fell by 12,000 to 215,000, the Labor Department reported Thursday, fewer than the 225,000 new applications forecast by analysts surveyed by FactSet. Weekly filings for unemployment benefits are considered representative of U.S. layoffs and are close to a real-time indicator of the health of the job market.
Markets, Oil, and the Usual Winners
U.S. markets rose on the final day of trading during the week after oil prices eased back to where they were before the war with Iran, but drops for AI stocks kept the market in check. The S&P 500 had its second losing week in the last 13, largely because of a retreat in the tech sector, particularly artificial-intelligence companies and related technology. The numbers show a system where the market celebrates when oil prices retreat, while ordinary people are left to absorb the costs of war, inflation, and the next round of corporate price increases.