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. The figure fell well short of the 3.0% forecast by economists polled by Reuters, and marked a sharp 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 estimated subtracted 1.5 percentage points from fourth-quarter GDP. The CBO noted that most of the lost output would eventually be recovered, though between $7bn and $14bn would be lost permanently. Former President Donald Trump posted on social media that the “Shutdown cost the U.S.A. at least two points in GDP.”
Consumer spending, a key driver of the economy, moderated from the third quarter’s brisk 3.5% pace. Economists noted that spending has been driven 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 fare well while lower-income consumers struggle with high inflation from import tariffs and stagnant wage growth.
Job growth remained weak, with only 181,000 jobs added in 2025—the fewest outside the pandemic since the 2009 Great Recession, and down from 1.459 million in 2024. Despite the sluggish data, economists expect tax cuts and investment in artificial intelligence to support activity this year. 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. Economists anticipate larger tax refunds this year due to tax cuts, which could provide a boost to consumer spending.
