By Anietie anii-bassey
Economic growth in the United States slowed dramatically during the final months of 2025, expanding at a far weaker pace than initially estimated as the effects of a lengthy federal government shutdown rippled through the economy.
New data released Friday by the U.S. Department of Commerce showed that the nation’s gross domestic product grew at an annual rate of just 0.7% from October through December.
The figure represented a major downward revision from the government’s earlier estimate of 1.4% growth and came as a surprise to economists who had widely expected the revision to show stronger economic activity rather than a slowdown.
Gross domestic product, the broadest measure of economic output that tracks the value of goods and services produced across the country, had expanded much more rapidly earlier in the year. Growth reached a strong 4.4% annual rate during the third quarter and 3.8% in the second quarter, making the sharp deceleration in the final quarter particularly notable.
Much of the slowdown was attributed to the economic disruption caused by a 43-day federal government shutdown that occurred in the fall. During that period, many government operations were partially halted and large numbers of federal employees were furloughed, sharply reducing federal spending and disrupting various public services.
Government spending and investment dropped steeply during the quarter, falling at a 16.7% annual rate. Economists estimate that the decline alone shaved more than one percentage point off overall economic growth during the October–December period.
Despite the weak finish to the year, the U.S. economy still recorded moderate growth overall in 2025. The Commerce Department reported that GDP expanded by 2.1% for the full year. While that pace is considered relatively solid, it represented a slight downgrade from the earlier estimate of 2.2% and marked a slowdown compared with previous years. The economy had grown 2.8% in 2024 and 2.9% in 2023.
Consumer spending — the largest driver of economic activity in the United States — also showed signs of weakening toward the end of the year. Household spending increased at a 2% annual rate in the fourth quarter, significantly below the 3.5% pace recorded during the third quarter. The figure was also weaker than the government’s earlier estimate of 2.4%.
Economists say the slowdown in consumer spending likely reflects rising energy costs, economic uncertainty and caution among households as global tensions increased.
Business investment offered some support to the economy but also came in below earlier projections. Spending by companies on equipment, technology and other capital investments — excluding residential housing construction — rose at a 2.2% annual rate in the fourth quarter.
While still considered healthy growth, the increase was slower than the 3.2% pace recorded in the third quarter and fell short of the government’s initial estimate of 3.7%.
Some analysts say a portion of the investment growth may be linked to increased spending on advanced computing systems and technologies associated with Artificial Intelligence, which has become a major focus for companies seeking to boost productivity and remain competitive.
International trade also weighed on economic performance during the quarter. U.S. exports declined at a 3.3% annual rate, a larger drop than earlier estimates suggested. The fall in exports reflects weaker demand from overseas markets as well as disruptions in global trade conditions.
Another key indicator within the GDP report, which economists often use to assess the underlying strength of the economy, also showed signs of softening. This measure combines consumer spending and private investment while excluding volatile factors such as exports, government spending and inventory changes.
That gauge expanded at a 1.9% annual rate in the fourth quarter, significantly slower than the 2.9% pace recorded during the previous quarter and below the earlier estimate of 2.4%.
Despite the slower growth toward the end of the year, the U.S. economy — the largest in the world — has demonstrated notable resilience in recent years. Economic activity has continued to expand even amid major policy shifts and geopolitical tensions.
Policies introduced under Donald Trump, including sweeping tariffs on imported goods and aggressive immigration enforcement measures, have reshaped several sectors of the economy. Supporters argue that these measures aim to strengthen domestic industry, while critics warn they could increase costs for businesses and consumers.
At the same time, international developments have added new uncertainty to the economic outlook. The ongoing conflict involving Iran has driven oil and gas prices higher, raising energy costs for businesses and households and contributing to concerns about global economic stability.
The labor market has also begun to show signs of strain. Recent data indicate that employers across the United States have slowed hiring considerably.
Last month alone, businesses, nonprofit organizations and government agencies collectively cut about 92,000 jobs. Over the course of 2025, employers added fewer than 10,000 jobs per month on average — the weakest pace of hiring outside of recession years since 2002.
Economists say the combination of slower job growth, rising energy prices and geopolitical tensions could weigh on economic momentum if the trends continue.
The GDP report released Friday represents the second of three official estimates of economic growth for the fourth quarter. Government economists typically revise the figures as more complete data becomes available.
Original articleA final estimate for fourth-quarter economic growth is scheduled to be released on April 9, which could provide additional adjustments to the latest figures and offer a clearer picture of the economy’s performance at the end of 2025.
Comments