U.S. Economic Growth Slows to 0.7% in Fourth Quarter Amid Shutdown Impact

WASHINGTON — The U.S. Economy experienced a significant slowdown in growth during the fourth quarter of 2025, advancing at a sluggish 0.7% annual rate from October through December. This marks a substantial downgrade from the initial estimate of 1.4% and reflects the impact of the 43-day government shutdown last fall, according to the Commerce Department report.

Sharp Decline from Previous Quarter

The 0.7% growth rate represents a sharp decline from the 4.4% growth recorded in the third quarter of 2025 and the 3.8% growth in the second quarter. Economists had anticipated a revision, but expected growth to be stronger, not weaker.

Government Shutdown’s Impact

Federal government spending and investment plummeted at a rate of 16.7% due to the shutdown, reducing fourth-quarter growth by 1.16 percentage points CBS News.

Full-Year GDP Growth

For all of 2025, GDP grew at a rate of 2.1%, which is considered solid growth but lower than the initial estimate of 2.2% and down from the 2.8% growth seen in 2024 NBC News.

Consumer Spending and Business Investment

Consumer spending grew at a 2% rate in the fourth quarter, a decrease from 3.5% in the third quarter. Business investment, excluding housing, increased by 2.2%, likely driven by investment in artificial intelligence, but also down from 3.2% in the previous quarter.

Other Factors Contributing to Slowdown

Exports fell at a 3.3% annual rate in the fourth quarter. An underlying measure of the economy’s strength grew at a 1.9% rate, down from 2.9% in the third quarter.

Economic Outlook and Job Market

The U.S. Economy has demonstrated resilience despite President Trump’s policies, but the war in Iran has contributed to rising oil and gas prices and increased uncertainty. The American job market is also showing signs of weakness, with companies cutting 92,000 jobs last month and adding fewer than 10,000 jobs per month in 2025 – the slowest pace outside of recession years since 2002 NBC News.

The final estimate for fourth-quarter growth is scheduled for release on April 9.