The U.S. Bureau of Economic Analysis (BEA) released an updated estimate showing that the U.S. economy grew at an annual rate of 0.7% in the fourth quarter of 2025, lower than the initial estimate of 1.4% and below economist expectations. This revision marks a significant slowdown in economic growth for the quarter.
Key points
Details
The BEA attributed the downward revision primarily to lower than expected exports, consumer spending, government spending, and investment figures, as well as a smaller decline in imports than previously estimated. Real final sales to private domestic purchasers, which include consumer spending and gross private fixed investment, increased by 1.9% in the quarter, revised down by 0.5 percentage points.
The report also noted the impact of the partial 43-day federal government shutdown last fall, which the BEA estimates reduced real GDP growth by about one percentage point due to decreased federal services and delayed paycheck spending by federal workers. However, the full effect of the shutdown on GDP data remains unquantified.
For the full year 2025, the economy expanded at an estimated annual rate of 2.08%, following a 0.6% contraction in the first quarter and growth rates of 3.8% and 4.4% in the second and third quarters, respectively. BEA plans to release a final revision to the fourth-quarter GDP figure as more data become available.
Economists noted that the slower growth comes amid sticky inflation and geopolitical concerns affecting energy prices. Ellen Zentner, chief economist at Morgan Stanley Wealth Management, emphasized that persistent inflation pressures could influence Federal Reserve policy. Investment analyst Bret Kenwell highlighted that the combination of slowing growth and a resilient labor market creates challenges for aggressive interest rate cuts unless more evident economic deterioration occurs.
The revised GDP data add complexity to the economic outlook ahead of the Federal Reserve’s upcoming policy meeting.
For more stories on this topic, visit our category page.
