A person shops at a grocery store in Schaumburg, Ill., in February. U.S. consumer spending grew at a rate of 2 per cent in the fourth quarter.Nam Y. Huh/The Associated Press
The U.S. economy, hobbled by last fall’s 43-day government shutdown, advanced at an unexpectedly sluggish 0.7-per-cent annual rate from October through December, the Commerce Department reported Friday in a big downgrade of its initial estimate.
Growth in gross domestic product – the nation’s output of goods and services – was down sharply from 4.4 per cent in last year’s third quarter and 3.8 per cent in the second. And the fourth-quarter number was half the government’s first estimate of 1.4 per cent; economists had expected the revision to go the other way – and show stronger growth.
Federal government spending and investment, clobbered by the shutdown, plunged at a 16.7-per-cent rate, hacking 1.16 percentage points off fourth-quarter growth.
For all of 2025, GDP grew 2.1 per cent, solid but down from an initial estimate of 2.2 per cent and from 2.8 per cent in 2024 and 2.9 per cent 2023.
In the fourth quarter, consumer spending grew at a 2-per-cent clip, down from 3.5 per cent in the third quarter and the 2.4 per cent the government had initially estimated. Business investment, excluding housing, increased at a healthy 2.2-per-cent pace, likely reflecting money being poured into artificial intelligence, but the increase was down from 3.2 per cent in the third quarter and from the 3.7-per-cent advance in the Commerce department’s initial estimate.
Exports fell at a 3.3-per-cent annual rate in the fourth quarter, a bigger drop than the government first estimated.
The U.S. economy – the world’s largest – has shown surprising resilience in the face of President Donald Trump’s policies, including sweeping import taxes and mass deportations. But the war with Iran has driven up oil and gas prices and clouded the economic outlook.
Meanwhile, the American job market is in a slump. Last month, companies, nonprofits and government agencies cut 92,000 jobs. In 2025, they added fewer than 10,000 jobs a month, the weakest hiring outside recession years since 2002.
Friday’s GDP was the second of the three estimates of fourth-quarter growth. The final report is due April 9.