The US economy grew at a slower pace than anticipated in the final months of 2025, according to official data. Real gross domestic product (GDP) increased at an annualised rate of 1.4% in the fourth quarter, falling short of the 2.8% growth economists had expected.
This represents a notable deceleration from the 4.4% growth recorded in the third quarter of 2025. For the full year, real GDP rose by 2.2%, which was below the 2.8% growth seen in 2024.
Key Drivers and Drags on Growth
The Bureau of Economic Analysis (BEA) stated the increase was primarily driven by rises in consumer spending and investment. However, these positive contributions were partly offset by decreases in government spending and exports.
Consumer spending growth slowed to 2.4% in Q4, down from 3.5% in the previous quarter. In contrast, fixed investment strengthened, rising 2.6% compared to 0.8% in Q3. Federal government spending saw a sharp decline of 16.6% in the fourth quarter, following a 2.7% increase in Q3.
Broader Economic Context for 2025 and 2026
The slowdown in Q4 capped a year of economic uncertainty and policy changes. The BEA attributed the overall annual growth to consumer spending and investment.
"We expect a strong year of economic growth in 2026, driven by business investment, consumer spending and fading trade headwinds," said Rick Gardner, chief investment officer of RGA Investments.
Recent data shows a mixed picture for the start of 2026. The job market, which added the fewest jobs in over two decades outside of recessions in 2025, began 2026 with stronger-than-expected job additions and cooling unemployment. Meanwhile, inflation, as measured by the Consumer Price Index, softened to 2.4% year-over-year in January, moving closer to the Federal Reserve's 2% target.
Impact of Government Shutdown
Analysts link the sharp drop in federal spending to the record-long government shutdown that occurred in October and November 2025. Retail sales data for December showed flat performance from November, though sales were better than a year earlier.
This story is based on official data from the Bureau of Economic Analysis. Please check back for updates.