In April, we received first-quarter GDP data indicating that the U.S. economy expanded by 2.0%, slightly below full-year 2025 growth of 2.1%. Consumer spending grew 1.6%, lower than prior readings, but still at a healthy pace, with weakness concentrated in discretionary categories such as recreational goods and restaurants. Meanwhile, healthcare spending continued to lead most categories, a theme we have consistently discussed. Business investment was particularly strong, up 8.7%, driven largely by spending on IT hardware and software (i.e., AI).
U.S. inflation (Consumer Price Index, CPI) rose to 3.3% year over year (YoY) in March, up from 2.4%. This increase was driven primarily by higher oil prices. Energy inflation rose sharply, from 0.5% to 12.5%. Core inflation, which excludes food and energy, was largely contained.
The U.S. added 178,000 jobs in March, while the unemployment rate edged down to 4.3% and wage inflation eased to 3.5%. Part of the decline in the unemployment rate reflects a contraction in the labor force, driven by demographic trends (an aging population and retirements) and slowing immigration.
Turning to geopolitics, the U.S. and Iran announced a ceasefire earlier this month, which was subsequently extended. After the first round of talks failed, the U.S. imposed a blockade in the Strait of Hormuz aimed at preventing goods from being exported and imported from Iran’s ports, further pressuring an already fragile Iranian economy. These pressures have been compounded by an ongoing internet shutdown.
Tehran has proposed a three-stage negotiation to the U.S., which was rejected. Stage 3 focuses on Iran’s nuclear program, the original impetus for the conflict, while Stage 1 centers on U.S. guarantees to end hostilities. Stage 2 involves negotiations over the status of the Strait of Hormuz, with Iran asserting control of the Strait until this phase is resolved. For decades, the risk that Iran could disrupt shipping through the Strait was largely theoretical. Recent developments, however, suggest this risk has become more tangible, establishing a new reality in which the Strait could be leveraged in future negotiations.
Separately, internal leadership dynamics in Iran are shifting. The Iranian Revolutionary Guard Corps (IRGC) has become more deeply embedded in governance and increasingly influential across the state, which is shaping negotiations and could prolong the conflict. As a result, ongoing geopolitical strain may continue to affect energy markets, energy inflation, and broader economic conditions.
Best,
Shailesh Kumar, Head of Global Insights Center
To contact our team, visit TheHartford.com/gic
The information, views, opinions, and recommendations provided in these materials is intended to be general and advisory in nature. The Hartford is not providing investment advice, tax advice, legal advice, business advice, or other professional advice. The Hartford does not guarantee or warrant the accuracy, completeness, or timeliness of, or otherwise endorse, the information, views, opinions, and recommendations provided in these materials. You should always seek the assistance of a professional for advice on investments, tax, business, the law, or other professional matters.
The Hartford Insurance Group, Inc., (NYSE: HIG) operates through its subsidiaries, including underwriting company Hartford Fire Insurance Company, under the brand name, The Hartford,® and is headquartered at One Hartford Plaza, Hartford, CT 06155. For additional details, please read The Hartford’s legal notice at https://www.thehartford.com.
