US Economy Growth Slows To 0.7% Fourth Quarter/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The U.S. economy grew at a slower-than-expected 0.7% annual pace in the fourth quarter of 2025. The Commerce Department downgraded its earlier estimate, citing the impact of a 43-day government shutdown. Weaker consumer spending, declining exports and reduced federal spending contributed to the slowdown.
US Economy GDP Growth Quick Looks
- U.S. GDP expanded at a 0.7% annual rate in Q4 2025.
- The figure was downgraded from the initial 1.4% estimate.
- Growth slowed sharply from 4.4% in the third quarter.
- A 43-day federal government shutdown reduced economic output.
- Federal spending and investment fell 16.7% during the quarter.
- Consumer spending rose 2%, weaker than the previous quarter.
- Exports dropped 3.3%, worsening the economic slowdown.
Deep Look
US Economy Growth Slows Sharply in Fourth Quarter
The U.S. economy expanded at a much slower pace than previously reported in the final months of 2025, according to updated data from the Commerce Department.
Gross domestic product (GDP), the broadest measure of economic activity, increased at a 0.7% annual rate between October and December, far weaker than the government’s earlier estimate of 1.4%.
Economists had expected the revised report to show stronger growth, but the new data instead revealed that economic activity slowed significantly toward the end of the year.
The slowdown marked a sharp contrast to earlier quarters in 2025. The economy grew 4.4% in the third quarter and 3.8% in the second quarter, highlighting how dramatically momentum faded by year’s end.
Government Shutdown Hit Economic Activity
One of the biggest factors behind the slowdown was the 43-day federal government shutdown that occurred during the fall.
Federal spending and investment plunged at an annualized rate of 16.7%, cutting roughly 1.16 percentage points from overall economic growth in the fourth quarter.
The shutdown forced many government agencies to halt operations, delaying projects and limiting spending that typically contributes to economic output.
Consumer Spending Slows
Consumer spending — which typically drives about two-thirds of U.S. economic activity — also weakened during the quarter.
Household spending grew at a 2% annual rate, slowing significantly from 3.5% growth in the third quarter.
The new estimate was also below the government’s initial forecast of 2.4% growth, suggesting Americans pulled back on spending toward the end of the year.
Economists say weaker consumption likely contributed heavily to the sluggish GDP performance.
Business Investment Remains Solid
Despite broader economic softness, business investment remained relatively stable.
Investment by businesses — excluding residential housing — grew at a 2.2% annual rate, though that was slower than the 3.2% increase recorded in the previous quarter.
Some economists say spending related to artificial intelligence technologies and infrastructure may have helped support business investment during the period.
However, the increase was still below the government’s earlier estimate of 3.7% growth, showing that business activity also lost momentum.
Exports Decline
International trade also weighed on economic growth.
U.S. exports fell at a 3.3% annual rate, a larger drop than previously estimated. Declining exports reduce GDP because fewer American goods and services are sold abroad.
The decline contributed further to the overall slowdown during the quarter.
Underlying Economic Strength Weakens
A key measure within the GDP report that economists use to gauge underlying economic strength also weakened.
This category includes consumer spending and private investment but excludes volatile factors such as exports, government spending and inventory changes.
The indicator grew at a 1.9% annual rate, down from 2.9% in the third quarter and below the earlier estimate of 2.4% growth.
The weaker figure suggests that the broader economy was already losing momentum even before accounting for temporary factors like the shutdown.
Annual Growth for 2025
For the full year, the U.S. economy grew 2.1% in 2025, slightly below the government’s earlier estimate of 2.2%.
The annual growth rate also marked a slowdown compared with previous years. The economy expanded 2.8% in 2024 and 2.9% in 2023.
Economic Uncertainty Ahead
Despite the recent slowdown, the U.S. economy has demonstrated resilience in recent years.
However, several factors are now clouding the economic outlook.
The ongoing war with Iran has pushed oil and gas prices higher, raising costs for businesses and consumers. At the same time, policy changes such as new import tariffs and immigration restrictions have created additional economic uncertainty.
The labor market is also showing signs of weakness. Employers cut 92,000 jobs last month, and hiring throughout 2025 averaged fewer than 10,000 new jobs per month — the weakest pace of job growth outside of recession periods since 2002.
Final GDP Estimate Still Ahead
Friday’s report represents the second of three estimates for fourth-quarter economic growth.
The Commerce Department will release the final GDP estimate for the period on April 9, which may revise the figures again as additional data becomes available.
For now, economists say the latest report confirms that the U.S. economy entered the end of 2025 with noticeably reduced momentum.
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