US Economy Slows to 0.5% Growth in 4th Quarter After Government Shutdown/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The U.S. economy grew just 0.5% in the fourth quarter. A 43-day government shutdown slowed growth significantly. Economic outlook remains uncertain amid global tensions.
US GDP Growth Slowdown Quick Looks
- GDP growth downgraded to 0.5%
- Government shutdown slowed economy
- Consumer spending weakened
- Federal spending fell sharply
- Business investment slowed
- 2025 growth slowed to 2.1%
- AI investment boosted business spending
- Job market shows mixed signals
- Energy prices create uncertainty
- First-quarter data due April 30
Deep Look: US Economy Slows to 0.5% Growth in Fourth Quarter
WASHINGTON — The U.S. economy slowed sharply in the final months of 2025, growing at just a 0.5% annual rate from October through December, according to a revised report from the Commerce Department.
The new figure represents a downgrade from the government’s previous estimate of 0.7% growth and marks a significant slowdown from earlier in the year. Economic growth had reached 4.4% in the third quarter and 3.8% in the second quarter before cooling late in the year.
Economists attributed much of the slowdown to last fall’s 43-day federal government shutdown, which reduced federal spending and disrupted economic activity.
Government Shutdown Weighs on Growth
Federal government spending and investment fell at a 16.6% annual rate during the fourth quarter.
That decline alone reduced overall economic growth by 1.16 percentage points.
The shutdown disrupted federal services, slowed government contracts, and reduced economic output during the period.
Consumer Spending Weakens
Consumer spending — the largest driver of U.S. economic growth — also slowed during the quarter.
- Consumer spending grew 1.9%
- Down from 3.5% earlier in the year
- Goods spending increased just 0.3%
Spending on items such as cars, clothing, and household goods weakened significantly compared with previous quarters.
Annual Growth Slows
For all of 2025, the U.S. economy expanded 2.1%, slower than:
- 2.8% growth in 2024
- 2.9% growth in 2023
The slowdown reflects tighter monetary policy, global uncertainty, and reduced consumer spending.
Business Investment Shows Mixed Picture
Business investment increased at a 2.4% annual rate during the fourth quarter.
Much of the spending was linked to artificial intelligence investments and technology infrastructure.
However, growth slowed from 3.2% in the third quarter, suggesting businesses remain cautious.
Underlying Economic Strength Weakens
A key measure of underlying economic strength — which excludes volatile factors such as exports and government spending — grew at a 1.8% pace.
That marked a decline from 2.9% growth in the previous quarter.
The slowdown suggests weakening momentum heading into 2026.
Job Market Shows Mixed Signals
The labor market has shown uneven performance:
- 160,000 jobs added in January
- 133,000 jobs lost in February
- 178,000 jobs added in March
Hiring volatility reflects economic uncertainty and shifting business conditions.
In 2025, hiring slowed significantly, marking the weakest job growth outside a recession since 2002.
Energy Prices Add Uncertainty
The economic outlook for 2026 remains uncertain due to geopolitical tensions and rising energy prices.
The U.S.-Israeli conflict with Iran disrupted global commerce and pushed oil prices higher.
Higher fuel costs affect:
- Transportation
- Manufacturing
- Consumer prices
- Business investment
These pressures could slow growth further in 2026.
Next Economic Report Coming Soon
Thursday’s report marks the Commerce Department’s third and final estimate for fourth-quarter GDP.
The first estimate for January–March 2026 growth will be released April 30.
Economists will closely watch that report for signs of whether the slowdown continues or economic momentum improves.
You must Register or Login to post a comment.