Fourth Quarter Economic Growth Falls Short, Revised Down to 0.7%

The Commerce Department significantly lowered its estimate for fourth-quarter economic growth to just 0.7%, citing damage from the 43-day federal government shutdown. The revised figure represents a major drop from earlier quarters and fell well below economists' expectations.

WASHINGTON — America’s economic growth stumbled badly in the final months of last year, with the Commerce Department on Friday slashing its growth estimate to a mere 0.7% annual rate for the October-December period. The revised figure represents a dramatic reduction from the government’s original projection of 1.4%.

The disappointing performance of the nation’s gross domestic product — which measures all goods and services produced — marked a steep decline from the robust 4.4% growth rate recorded in the third quarter and 3.8% in the second quarter. Analysts had anticipated the revision would actually show improved growth rather than the weaker numbers released.

The 43-day federal government shutdown that occurred last fall dealt a severe blow to economic activity. Government spending and investment collapsed at a 16.7% rate during the quarter, subtracting 1.16 percentage points from overall economic expansion.

Looking at the full year 2025, the economy managed 2.1% growth — a respectable showing but lower than the initially reported 2.2%. This also represented a slowdown from the 2.8% growth achieved in 2024 and 2.9% in 2023.

Consumer spending, which drives much of the nation’s economic activity, expanded at a modest 2% pace during the fourth quarter. This marked a deceleration from the third quarter’s 3.5% rate and fell short of the government’s initial 2.4% estimate. Business investment outside of housing managed a solid 2.2% increase, likely boosted by companies investing heavily in artificial intelligence technology, though this too represented a slowdown from the previous quarter’s 3.2% growth.

International trade also weighed on growth, with exports declining at a 3.3% annual rate — a steeper drop than originally calculated.

A key economic indicator that strips out volatile components like trade, inventories and government spending showed underlying economic strength growing at just 1.9%. This core measure fell short of the third quarter’s 2.9% pace and the initial estimate of 2.4%.

Despite being the world’s largest economy, the United States has faced headwinds from President Donald Trump’s economic policies, including broad import tariffs and large-scale deportation efforts. Rising oil and gas prices stemming from the conflict with Iran have further complicated the economic picture.

The job market has also shown signs of strain. Employment fell by 92,000 positions last month, while 2025 saw companies, nonprofits and government agencies add fewer than 10,000 jobs monthly — the weakest hiring performance outside of recession years since 2002.

Friday’s report represents the second of three quarterly growth estimates, with the final revision scheduled for release on April 9.