U.S. Economic growth slowed sharply in the fourth quarter of 2025, registering a gain of just 1.4%, well below expectations and marking the weakest growth since the end of the pandemic. The deceleration, reported by the Commerce Department on , was significantly lower than the Dow Jones estimate of 2.5% and reflects the lingering impact of the recent government shutdown and a moderation in consumer spending.
The slowdown brings the full-year growth for 2025 to 2.2%, a decline from the 2.8% increase recorded in 2024. While the economy continues to expand, the deceleration raises concerns about the sustainability of the recovery and the potential for further headwinds in the coming months.
Shutdown’s Impact Quantified, Though Imperfectly
The government shutdown, which spanned the first half of the fourth quarter, is estimated to have subtracted approximately 1 percentage point from economic growth, according to the Commerce Department. However, officials acknowledged that the precise impact “cannot be quantified” fully. The shutdown disrupted government services, delayed payments, and dampened economic activity across various sectors.
Beyond the shutdown, a slowdown in consumer spending also contributed to the weaker-than-expected growth. While consumer spending remains a key driver of the U.S. Economy, its pace of increase moderated during the quarter. This suggests that consumers may be becoming more cautious in their spending habits, potentially due to concerns about inflation or the economic outlook.
Inflation Remains a Factor
Despite the economic slowdown, inflation remained stubbornly persistent in December, with a key gauge watched by Federal Reserve officials increasing 3% from a year ago. This suggests that inflationary pressures are still present in the economy, potentially complicating the Fed’s efforts to balance economic growth and price stability.
Sectoral Breakdown and Expert Commentary
The report detailed a sharp tumble in government spending during the quarter, directly linked to the shutdown. Consumer spending also increased at a slower pace. Chris Rupkey, chief economist at Fwdbonds, noted that the shutdown was a “one-off” event unlikely to be repeated in early 2026, suggesting a potential rebound in growth. “The Federal government shutdown clearly sent the economy careening off its strong growth path in the fourth quarter,” Rupkey said.
The deceleration in growth comes after President Donald Trump warned that the GDP number would be soft, attributing it to the government shutdown. In a post on Truth Social, Trump stated that the shutdown “cost the U.S.A. At least two points in GDP” and called for “LOWER INTEREST RATES.”
Broader Economic Context
The slowdown in the U.S. Economy occurred against a backdrop of global economic uncertainty, including ongoing geopolitical tensions and trade disputes. The U.S. Economy has also been grappling with the effects of aggressive monetary policy tightening by the Federal Reserve, aimed at curbing inflation.
Stephanie Roth, chief economist at Wolfe Research, told CNN that the slower growth in 2025, compared to prior years, was “great given how much labor supply is down.” She described the situation as “Goldilocks,” suggesting a balance between growth and labor market conditions.
Looking Ahead
Economists anticipate that the impact of the government shutdown will likely be temporary, and that economic growth could rebound in the first quarter of 2026 as government activity resumes. However, the persistence of inflation and the potential for further economic headwinds remain key risks to the outlook. The Federal Reserve will be closely monitoring economic data in the coming months as it considers its next steps on monetary policy.
The slower growth rate underscores the fragility of the economic recovery and the challenges facing policymakers as they navigate a complex economic landscape. The combination of a government shutdown, moderating consumer spending, and persistent inflation presents a difficult set of circumstances for the U.S. Economy.
The report from the Bureau of Economic Analysis (BEA) provides an advance estimate, and revisions are expected in subsequent releases. The data highlights the sensitivity of the U.S. Economy to political events and the importance of stable government functioning for sustained economic growth.
