US economy grew a sluggish 0.5% in fourth quarter, government says, downgrading previous estimate
The American economy, slowed by last fall’s 43-day government shutdown, grew at a 0.5% annual pace from October through December, the Commerce Department said Thursday, down from its previous 0.7% estimate.
U.S. gross domestic product slowed in the fourth quarter after growing 4.4% from July through September and 3.8% from April through June. Federal spending and investment fell at a 16.6% annual rate due to the shutdown, cutting 1.16 percentage points from GDP. Consumer spending rose 1.9%, below the prior estimate and down from 3.5% in the second quarter. Spending on goods such as cars and clothing increased 0.3%, down from 3% in the previous quarter.
For 2025, the economy grew 2.1%, slower than 2.8% in 2024 and 2.9% in 2023. Business investment excluding housing rose 2.4%, likely reflecting artificial intelligence spending, but down from 3.2% in the third quarter.
A measure of underlying strength that includes consumer spending and private investment but excludes exports, inventories and government spending grew 1.8%, down from 2.9%.
The outlook is uncertain after the U.S.-Israeli war with Iran raised energy prices and disrupted global commerce. The job market weakened last year, with the slowest hiring outside a recession since 2002, and has been uneven in 2026: 160,000 jobs added in January, 133,000 cut in February, then 178,000 added in March.
Thursday’s report was the Commerce Department’s third and final fourth quarter GDP estimate. The first estimate for January through March is due April 30.
