US Economy Growth Slows Down
The US economy grew at a slower pace than expected in the fourth quarter of 2025, with an annualized rate of 1.4%. This is lower than the expected 2.9% growth rate predicted by economists. The Bureau of Economic Analysis (BEA) released this data, which was initially scheduled for release on January 29 but was delayed due to the government shutdown in October and November.
Impact of Government Shutdown
The government shutdown had a significant impact on the economy, with government spending falling at an annualized rate of 5.1% in the fourth quarter. This decrease in government spending took 0.9 percentage points off the headline growth rate. Federal government spending fell at an even faster rate of 16.6%, contributing to a 1.15 percentage point drop in headline growth.
Reaction from President Trump
President Trump commented on the situation, stating that the 43-day shutdown cost the US economy "at least two points in GDP." He also called for lower interest rates. The president’s statement was posted on Truth Social ahead of the report’s release.
Economic Forecast
Despite the slowdown, economists predict that the impact of the shutdown will be reversed in the first quarter of 2026. Paul Ashworth, chief North America economist at Capital Economics, expects annualized GDP growth to hit 3% in the first quarter. The BEA also noted that underlying spending trends remained solid, with real final sales to private domestic purchasers increasing 2.4% in the fourth quarter.
Spending Trends
The report showed a sharp divide in spending between goods and services. Services spending rose at a 3.4% rate, while goods spending actually fell 0.1%. The AI build-out also continued to have an impact on economic growth, with spending on information processing equipment contributing 0.65 percentage points to economic growth in the quarter.
Annual Economic Growth
For the year, the US economy grew 2.2%, a modest slowdown from the 2.8% growth seen in 2024. This slowdown is attributed to the government shutdown and other factors.
Conclusion
In conclusion, the US economy experienced a slower growth rate in the fourth quarter of 2025 due to the government shutdown and other factors. However, economists predict that the impact of the shutdown will be reversed in the first quarter of 2026, and underlying spending trends remain solid. As the economy continues to evolve, it is essential to stay informed about the latest economic news and indicators to make informed investing decisions. Click here for the latest economic news and indicators to help inform your investing decisions. Read the latest financial and business news from Yahoo Finance.
