The latest reading on U.S. economic growth was steady, even if it came in slightly below expectations. First-quarter GDP expanded at a 2.0% annualized rate. That is not a weak number. It remains above what many economists view as the economy’s long-term trend.

But as is often the case, the headline does not tell the full story. To understand where the economy may be headed next, it helps to look beneath the surface, especially at the U.S. consumer.

A Slower, but Still Critical, Consumer

Consumer spending, which drives roughly two-thirds of U.S. economic activity, continued to grow, but at a more modest pace. Spending increased at a 1.6% annual rate, down from 1.9% in the prior quarter.

That is not alarming by itself. The more important question is whether the current pace of spending is sustainable.

The personal saving rate declined during the quarter. That suggests some households may be relying more on savings, or potentially credit, to maintain their current spending. If energy prices rise in the near term, that pressure could increase.

In practical terms, consumers are still supporting the economy, but with less cushion than before.

Business Investment Is Surging, but It Is Not a Substitute

At the same time, business investment, particularly in technology, has accelerated. Spending on digital equipment and software has climbed sharply, reflecting continued momentum in artificial intelligence and related infrastructure.

That is a positive development. Business investment can support productivity, innovation, and longer-term economic growth.

Still, it is important not to overstate its ability to offset a slowing consumer.

Consumer spending remains such a large share of GDP that even modest growth can make a meaningful contribution to overall economic activity. Investment is rising quickly, but it starts from a smaller base.

There is also a technical point worth noting. Some inputs needed for this investment, such as imported technology components, are counted as imports. Imports subtract from GDP. As a result, the net boost to growth may be smaller than some headlines suggest.

A Shifting Dynamic Worth Watching

Historically, strong business investment and strong consumer spending have often moved together. In prior economic cycles, including the technology expansion of the 1990s, consumer demand helped justify and sustain corporate investment.

Today, that relationship appears to be changing.

Investment, particularly in AI-related infrastructure, may be running ahead of consumer demand rather than responding to it. That is not necessarily negative, but it does add uncertainty.

If consumer spending continues to soften, businesses may eventually reassess the pace of their investment.

What This Means for Investors

For investors, the takeaway isn’t that the economy is weakening dramatically: it isn’t. 

Growth remains positive, and key areas of investment continue to show strength. However, the balance within the economy is shifting. Consumers are still resilient, but more sensitive to rising costs. Business investment remains solid, but it may not fully offset changes in consumer behavior. And external factors, like energy prices, have the potential to influence both in the months ahead.

At West Advisory Group, we’ve seen this kind of environment before. It’s about perspective. 

We recognize that while we can’t control economic cycles or shifting market dynamics, we can control how prepared our clients are for them. 

That’s exactly why we developed our PEAK FORMula, a disciplined, time-tested approach designed to help navigate the ebbs and flows of retirement life with confidence and clarity.

A Plan Built for Changing Conditions

A helpful way to view today’s environment is this: the economy is still expanding, but with less margin for error. That doesn’t call for dramatic changes to a long-term strategy, but it does reinforce the importance of being intentional about how your portfolio is structured.

For those within five years of retirement, this becomes even more critical. 

As you transition from the accumulation phase of your working life into the distribution phase of retirement, your strategy needs to be aligned not just with growth, but with income, preservation, and stability.

Through our PEAK FORMula, our team of experts works to ensure portfolios are diversified, aligned with each client’s goals, and built to handle varying economic conditions. We focus on what can be controlled, risk exposure, time horizon alignment, and thoughtful allocation, so that our clients aren’t left reacting to every shift in the market.

Because when different parts of the economy are moving at different speeds, having a clear, structured plan isn’t just helpful, it’s essential.