Private-Sector GDP Growth Slows to 1% in Q1 2026, Trailing Public Sector at 4%, Paulsen Warns

According to economist Paul Paulsen of Leuthold Group, as reported by Business Insider, private-sector real GDP growth decelerated to just 1% in Q1 2026, significantly trailing public-sector growth of 4%. Paulsen highlighted that this marks a reversal of historical patterns where private-sector expansion typically outpaces government growth. He notes that historically, when public-sector contributions to GDP growth exceed private-sector contributions, stock markets tend to perform weakly. Paulsen cited rising government spending, including increased defense expenditures expected in Q2 due to geopolitical tensions, combined with slowing private enterprise growth driven by higher interest rates and elevated energy prices, as contributing factors. "This could bring volatility to stock markets," Paulsen wrote on Substack.
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