New report says Trump's economy grew much slower than expected in the fourth quarter
The U.S. economic growth slowed at the end of last year, with consumer spending cooling off amid the longest government shutdown in the country's history. According to the advance estimate from the Commerce Department's Bureau of Economic Analysis (BEA), the gross domestic product (GDP) for the fourth quarter grew at an annual rate of 1.4% from October to December. The number fell below the 3% rate that analysts expected and was far lower than the 4.4% growth rate of the previous quarter.
The wobbly numbers capped a turbulent year for the U.S. economy, which pushed through a slew of new tariffs, a crackdown on immigration, cuts to government spending, a shutdown, and stubborn inflation. While economists surveyed by LSEG expected the economy to grow at a 3% rate in the final quarter, the numbers revealed a 0.6% GDP contraction compared to the third quarter, Fox News reported. With the latest report, 2025 closed with an annual rate of a modest 2.25%, still better than what many anticipated in the face of the pressures.
"Government spending was a notable drag, largely due to the longest government shutdown in history, which should reverse in the current quarter," Angelo Kourkafas, senior global strategist for investment strategy at Edward Jones, told Fox. According to estimates from the non-partisan Congressional Budget Office (CBO), the shutdown cut 1.5 percentage points from the final quarter GDP, with fewer services provided by the federal workers, a cut in federal spending on goods and services, and a temporary cut in Supplemental Nutrition Assistance Program benefits. While the CBO estimated most of the losses would be recovered, between $7 billion and $14 billion, it was not recoverable. 
Furthermore, the BEA noted that consumer spending and investment added to the GDP, but the gains were partly offset by a decrease in government spending on exports. Imports also declined in the fourth quarter, and the "real final sales" to domestic purchasers, or the total of consumer spending and private fixed investment, grew by 2.4% in Q4, down from a gain of 2.9% in the third quarter. U.S. Treasury Secretary Scott Bessent recently stated that the Q4 numbers weren't a setback and he expected the GDP to grow by at least 3.6% in 2026. Speaking on Fox News' "The Will Cain Show" on Friday, Bessent blamed the sharp decline in growth on the partial government shutdown and the increase in write-offs of losses by U.S. automakers. He claimed that the GDP growth could have been 100 to 200 basis points higher without the shutdown, Reuters reported. 
A separate report showed an uptick in the Personal Consumption Expenditures (PCE) price index, which is the preferred inflation measure of the Federal Reserve. The PCE hit 2.9% in December, and while analysts believe the slowdown in GDP growth isn't alarming, the inflation figure could push the U.S. Central Bank to pause rate cuts. "Despite the dovish read from the weaker end to 2025, lingering inflation pressures are likely to keep the Fed on the sidelines for a while longer," Kourkafas added in his statement.
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