Washington
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\n The US economy grew at a much slower pace in the final months of 2025 as the historic government shutdown weighed on economic activity, ending a year that saw the weakest growth since the pandemic.\n <\/p>\n
\n Still, it was far from the worst-case scenario economists feared when President Donald Trump unveiled his sweeping tariffs last spring. The economy grew in 2025, despite tariffs, an aggressive clampdown on immigration<\/a> and one of the weakest stretches of job creation<\/a> since the Great Recession, largely thanks to wealthy consumers who continued to spend.\n <\/p>\n \n Gross domestic product, which measures all the goods and services produced in the economy, registered at an annualized rate of 1.4% from October through December, the Commerce Department said Friday. That\u2019s a marked slowdown from the 4.4% rate in the third quarter, and lower than the 1.9% rate economists projected in a poll by data firm FactSet. GDP is adjusted for seasonal swings and inflation.\n <\/p>\n \n Overall, the economy grew by 2.2% in 2025, the slowest pace since 2020.\n <\/p>\n \n Stephanie Roth, chief economist at Wolfe Research, told CNN that last year\u2019s slower growth, compared to prior years, was \u201cgreat given how much labor supply is down.\u201d\n <\/p>\n \n \u201cYou could call it \u2018Goldilocks,\u2019\u201d she said.\n <\/p>\n \n The cuts in federal spending, due to the shutdown, shaved off 1.1 percentage points from growth last quarter, according to the report, with economists widely expecting most of those losses to be recouped early this year.\n <\/p>\n \n Consumers pulling back slightly on goods purchases also took a toll on fourth-quarter GDP.\n <\/p>\n \n The fourth-quarter reading was delayed a month because of last year\u2019s government shutdown.\n <\/p>\n \n Consumer spending, the lifeblood of the US economy, slowed in the fourth quarter to an annual rate of 1.4%, the weakest pace since early 2025. Over the past year, spending has been uneven by income bracket, with the poorest Americans buckling under the weight of rising debt, a slowing labor market and cumulative inflation<\/a> over the past several years.\n <\/p>\n \n \u201cA slower pace of consumer spending was expected for the final quarter of 2025, as some Americans had just shelled out for a new car before electric vehicle tax credits expired,\u201d said Brett Ryan, senior US economist at Deutsche Bank.\n <\/p>\n \n However, Ryan expects that key economic engine will pick back up in the first part of this year, largely because of tax refunds, adding that there\u2019s \u201ccertainly nothing that would get you too concerned about an imminent consumer slowdown.\u201d\n <\/p>\n \n The widening inequality in America has prompted households with fewer means to sour on the economy over the past year. In a separate report on Friday, the University of Michigan reported that consumer sentiment continued to diverge between those with college degrees and stock investments, and those without.\n <\/p>\n \n \u201cA sizable month-to-month increase in sentiment for the largest stockholders was fully offset by a decline among consumers without stock holdings,\u201d Joanne Hsu, the survey\u2019s director, said in a release. \u201cSimilar divergences were seen across income and education, where higher-income or college educated consumers exhibited increases in sentiment while lower-income or less-educated counterparts did not.\u201d\n <\/p>\n \n Meanwhile, business spending edged higher in the fourth quarter to 3.7% from the 3.2% in the prior three-month period. Ryan said that \u201cAI spending is still definitely doing a lot of heavy lifting\u201d on the business investment side.\n <\/p>\n Income gains and savings slip while inflation picks up<\/p>\n \n A separate Commerce Department report released Friday showed that consumer spending remained in the black during December; however, the supports propping up those purchases grew weaker; and inflation heated up to its highest rate in nearly two years.\n <\/p>\n