Investing.com -- The U.S. economy has so far weathered the Iran conflict with limited disruption to activity, but Barclays believes the durability of that resilience remains an open question.

The bank's tracking estimate for first-quarter GDP growth stands at 2.3% quarter-on-quarter seasonally adjusted annual rate, about a percentage point above the GDPNow estimate.

Barclays attributes the gap largely to the normalization of government spending following last year's federal shutdown.

The bank retains its baseline forecast for GDP growth of 2.4% on a fourth-quarter-over-fourth-quarter basis in 2026 and 1.5% in 2027.

A March decline of 0.5% month-on-month in industrial production came in softer than expected, but Barclays said the drop "mostly reflect normalization of volatile components" including utilities, auto assemblies and mining, rather than genuine demand weakness.

AI-related capital goods demand is described as "riding especially high" so far this year.

Consumer spending is a softer spot, tracking at just 0.8% quarter-on-quarter annualized through February. Barclays expects March retail sales to rise 1.3% month-on-month, with the control group (a closer proxy for underlying demand) up 0.3%.

On fiscal policy, Barclays raised its budget deficit projections to $2.0 trillion in both fiscal years 2026 and 2027, citing likely shortfalls in tariff revenue and additional defense spending. The bank said this should help cushion demand against geopolitical headwinds.

Barclays expects the Federal Reserve to hold rates in April, with 25 basis point cuts penciled in for September 2026 and March 2027, though it flagged risks skewing toward a more prolonged hold.