The U.S. economy grew at an annual rate of just 0.5 percent in the fourth quarter of 2025, a sharp drop from the 4.4 percent growth recorded in the third quarter. The Bureau of Economic Analysis issued its third and final estimate for the quarter, revising the figure down from a prior 0.7 percent reading. As detailed by Quartz, the downward revision underscores how much momentum the economy lost toward the end of the year.
The primary driver behind the revision was a pullback in private inventory investment, particularly within wholesale trade. When the U.S. Census Bureau updated its inventory data, it became clear that businesses were not stocking up as much as previously estimated. Consumer spending and investment provided some support to the overall figures, but those gains were largely offset by contractions in both exports and government outlays.
A major factor in the sluggish performance was the federal government shutdown that ran from October 1 to November 12, 2025. The Bureau of Economic Analysis estimated the shutdown alone subtracted roughly 1 percentage point from real GDP growth. Because of the disruption, the Bureau of Labor Statistics was unable to collect October consumer price index data and had to impute price indexes for that month, and the release of the third estimate, originally expected on March 27, was postponed.
The federal shutdown left a visible mark on nearly every sector of the economy
When looking at the industry breakdown, the impact of the shutdown is apparent throughout. Private goods-producing industries contracted by 1.8 percent, while the federal government’s contribution dropped by 7.8 percent. Private services-producing industries managed to grow by 2.3 percent, led by wholesale trade, information, and health care and social assistance. Real gross output decreased by 0.5 percent overall, reflecting the broader pressure on goods-producing sectors and government services.
The regional picture was just as uneven. Real GDP increased in 35 states, with North Dakota leading at 3.8 percent growth driven largely by its agricultural sector. At the opposite end, the District of Columbia saw its real GDP shrink by 8.3 percent, a decline tied directly to the concentration of federal civilian employment in the area. Trump’s approach to federal spending has drawn scrutiny on multiple fronts, with a Democrat filing articles of impeachment citing the administration’s broader conduct.
Corporate profits showed more resilience than the headline GDP figure suggested. Profits from current production rose by $246.9 billion in the fourth quarter, up from the $175.6 billion increase recorded in the third quarter. Real gross domestic income also rose by 2.6 percent, and when averaged with real GDP, that produces a blended growth figure of 1.5 percent for the quarter.
For the full year, real GDP increased by 2.1 percent, down from the 2.8 percent growth recorded in 2024. The price index for gross domestic purchases rose by 3.7 percent in the fourth quarter, while the personal consumption expenditures price index rose by 2.9 percent. The core index, which strips out food and energy, came in at 2.7 percent. None of these inflation figures changed from the prior estimate. Amid broader questions about the administration’s economic direction, Trump separately threatened 50% tariffs targeting Iran’s military suppliers aimed primarily at China and Russia.
The Bureau of Economic Analysis has scheduled the advance estimate for the first quarter of 2026 for release on April 30, 2026.
Published: Apr 10, 2026 05:30 pm