US Economic Growth Slows to 1.4% in Q4 2025, Raising Concerns

The US economy experienced a significant slowdown in growth during the fourth quarter of 2025, with the gross domestic product (GDP) increasing at an annualized rate of just 1.4%. This figure falls considerably short of the 2.9% growth economists had predicted according to data released by the Bureau of Economic Analysis on Friday, February 20, 2026.

Factors Contributing to the Slowdown

Several factors contributed to the weaker-than-expected growth. A key drag on the economy was a decrease in government spending, which fell at an annualized rate of 5.1% in the fourth quarter, reducing the headline growth rate by 0.9 percentage points. Federal government spending experienced an even sharper decline, falling 16.6% and contributing to a 1.15 percentage point drop in overall GDP growth as reported by the Bureau of Economic Analysis.

The 43-day government shutdown, spanning October and parts of November, significantly impacted data collection and economic activity. President Trump attributed the slowdown, at least in part, to the shutdown, stating it cost the US economy “at least two points in GDP” via a post on Truth Social.

Underlying Economic Trends Remain Solid

Despite the slowdown, underlying spending trends remained relatively solid. Real final sales to private domestic purchasers – encompassing consumer spending and gross private fixed investment – increased. The deceleration in real GDP too reflected downturns in government spending and exports, alongside a deceleration in consumer spending according to the BEA.

Looking Ahead to 2026

Economists anticipate a rebound in the first quarter of 2026. Paul Ashworth, chief North America economist at Capital Economics, forecasts annualized GDP growth to reach 3% in the first quarter, expecting the negative impact of the shutdown to reverse as noted in a research note. President Trump also continues to call for lower interest rates.

Current US GDP

As of the fourth quarter of 2025, the United States’ gross domestic product stands at $31.49 trillion according to Forbes.