US economic growth slowed more than expected in the fourth quarter of 2025, with gross domestic product (GDP) rising at an annualised rate of just 1.4%, according to the Commerce Department's Bureau of Economic Analysis. This was sharply below the 3.0% forecast by economists polled by Reuters, and a significant deceleration from the 4.4% growth recorded in the third quarter.
The slowdown was largely attributed to disruptions from last year's government shutdown, which the non-partisan Congressional Budget Office (CBO) estimated subtracted 1.5 percentage points from fourth-quarter GDP. The CBO noted that while most lost output would eventually be recovered, between $7bn and $14bn would not be recouped.
Consumer spending, a key driver of the economy, moderated from the third quarter's brisk 3.5% pace. Economists noted that spending has been sustained primarily by higher-income households, often at the expense of savings, as inflation eroded purchasing power. The report highlighted a 'K-shaped' economy, where upper-income households fared well while lower-income consumers struggled with high inflation from import tariffs and stagnant wage growth.
Despite the weak fourth-quarter data, tax cuts and investment in artificial intelligence (AI) are expected to support growth this year. Economists estimated that AI-related sectors—including data centres, semiconductors, software, and research and development—accounted for a third of GDP growth in the first three quarters of 2025, helping to offset the impact of tariffs and reduced immigration.
The report, delayed by the record 43-day government shutdown, is unlikely to influence monetary policy. Former President Donald Trump posted on social media that the shutdown cost the US 'at least two points in GDP' and called for lower interest rates.
