Washington —
The growth of the U.S. economy slowed significantly during the last months of 2025, impacted largely by the historic government shutdown, concluding a year marked by the slowest economic expansion since the pandemic. Despite facing challenges such as tariffs imposed by President Donald Trump last spring and one of the weakest job creation periods since the Great Recession, the economy continued to grow, largely sustained by spending from affluent consumers.
According to the Commerce Department, the gross domestic product (GDP), which encompasses all goods and services produced in the economy, increased at an annualized rate of 1.4% from October to December. This pace represents a sharp decline from the robust 4.4% growth rate recorded in the third quarter and fell short of the 1.9% forecasted by economists from the data firm FactSet. It is important to note that this GDP figure is adjusted for seasonal variations and inflation.
Overall, the U.S. economy expanded by 2.2% in 2025, marking the slowest growth rate since 2020. The release of the fourth-quarter GDP data was delayed by a month due to the government shutdown, with estimates suggesting that it may have dented GDP by anywhere from 0.5 to 1.5 percentage points. Economists remain hopeful that the economy will recover any losses in the ongoing quarter.
Factors contributing to the slowdown included cuts in federal spending along with a slight reduction in consumer spending on goods. Consumer spending, a crucial element of the U.S. economy, decelerated to an annual rate of 1.4% in the fourth quarter, the slowest pace since early in 2025. This trend has been particularly pronounced among lower-income households, who are grappling with rising debt, a cooling job market, and persistent inflation over recent years.
On a brighter note, business investment experienced a moderate uptick, rising to 3.7% from 3.2% in the previous quarter. However, the stock market reacted negatively to the data release, with Dow futures declining by 111 points, or 0.23%, and S&P 500 futures falling by 0.3% amid this economic landscape.
These developments indicate a determined but challenged economy, with the potential for recovery as spending patterns and business investments shift in response to current economic pressures.