US economic growth slowed more than expected in the fourth quarter of 2025, with gross domestic product (GDP) increasing at an annualised rate of just 1.4%, according to the Commerce Department's Bureau of Economic Analysis. This fell well short of the 3.0% pace 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 the record 43-day government shutdown, which the non-partisan Congressional Budget Office (CBO) estimated subtracted 1.5 percentage points from fourth-quarter GDP. The CBO noted that most lost output would eventually be recovered, though between $7bn and $14bn would not. 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, as high inflation from import tariffs and stalling wage growth weighed on lower-income households. Economists described a 'K-shaped' recovery, where upper-income households fared well while poorer consumers struggled, creating what some have called an affordability crisis. Only 181,000 jobs were added in 2025, the fewest outside the pandemic since the 2009 Great Recession.
Despite the weak quarter, tax cuts and investment in artificial intelligence (AI) were expected to support growth in 2026. Economists estimated that AI-related spending—including datacenters, semiconductors, software, and research and development—accounted for a third of GDP growth in the first three quarters of 2025, helping to blunt the impact of tariffs and reduced immigration. The stale report is unlikely to influence monetary policy.
