WASHINGTON (AP) \u2014 The U.S. economy, hobbled by last fall\u2019s 43-day government shutdown, advanced at an unexpectedly sluggish 0.7% annual rate from October through December, the Commerce Department reported Friday in a big downgrade of its initial estimate.<\/p>\n
Growth in gross domestic product \u2014 the nation\u2019s output of goods and services \u2014 was down sharply from 4.4% in last year\u2019s third quarter and 3.8% in the second. And the fourth-quarter number was half the government\u2019s first estimate of 1.4%<\/a>; economists had expected the revision to go the other way \u2014 and show stronger growth.<\/p>\n Federal government spending and investment, clobbered by the shutdown, plunged at a 16.7% rate, hacking 1.16 percentage points off fourth-quarter growth.<\/p>\n For all of 2025, GDP grew 2.1%, solid but down from an initial estimate of 2.2% and from 2.8% in 2024 and 2.9% 2023.<\/p>\n In the fourth quarter, consumer spending grew at a 2% clip, down from 3.5% in the third quarter and the 2.4% the government had initially estimated. Business investment, excluding housing, increased at a healthy 2.2% pace, likely reflecting money being poured into artificial intelligence, but the increase was down from 3.2% in the third quarter and from the 3.7% advance in the Commerce department\u2019s initial estimate. <\/p>\n Exports fell at a 3.3% annual rate in the fourth quarter, a bigger drop than the government first estimated. <\/p>\n A category within the GDP data that measures the economy\u2019s underlying strength came in weaker than previously reported, growing at a 1.9% clip, down from 2.9% in the third quarter and from the first estimate of 2.4%. This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending.<\/p>\n \u201cFollowing two consecutive strong readings for the second and third quarters, the economy was expected to soften heading into year-end. It\u2019s now increasingly clear that the economy not only slowed but stumbled into the finish line,\u201d Jim Baird, chief investment officer at Plante Moran Financial Advisors, said in a commentary. \u201cThe government shutdown was certainly a major factor in the loss of momentum, but a sharp decline in consumption growth also played a role.\u2019’<\/p>\n