Why this number might be more important than GDP

Last week, we got the first estimate of gross domestic product for the first quarter of 2026: 2% flat. But buried in that report was another number that came in stronger, at 2.5%, called final sales to private domestic purchasers.

“I know it sounds like the most technical, confusing thing,” said Carrie Freestone, senior U.S. economist at RBC. “But when you realize it’s essentially just business investment, housing, and consumption, it’s actually much easier to think about it.”

Essentially, it’s a measure of American demand — how much consumers and businesses are buying. To get there, final sales to domestic purchasers strips out three components of overall GDP.

First, net exports. That’s because net exports tell us about demand from other countries, while this measure focuses on demand from American businesses and consumers.

The second component cut from the measure is inventories.

“If you had a whole bunch of unsold cars, do you really want that in your measure of what people want to buy?” said Menzie Chinn, a professor at the University of Wisconsin, Madison.

When companies stockpiled goods last year to get ahead of tariffs, for example, those spiking inventories didn’t tell us about demand for final sales that consumers might make months later.

And finally, government consumption. At the end of last year, during the government shutdown, GDP grew at 0.5%. But final sales to private domestic purchasers, which strips out all the government spending that didn’t happen, was actually close to 2%.

“At the end of the day, there will continue to be government shutdowns and trade distortions,” Freestone said. “So it’s really, when we strip out all of the noise and look beneath the hood, how healthy is the U.S. economy?”