U.S. economy expanded at sluggish 0.7% in fourth quarter, government says, downgrading first estimate

The U.S. economy, hobbled by last fall’s 43-day government shutdown, advanced at a sluggish 0.7% annual rate from October through December, the Commerce Department reported Friday in a big downgrade of its initial estimate

The U.S. economy, hobbled by last fall’s 43-day government shutdown, advanced at a sluggish 0.7% annual rate from October through December, the Commerce Department reported Friday in a big downgrade of its initial estimate.

Growth in gross domestic product — the nation’s output of goods and services — was down sharply from 4.4% in last year’s third quarter and 3.8% in the second. And the fourth-quarter number was half the government’s first estimate of 1.4%; economists had expected the revision to go the other way — and show stronger growth.

Federal government spending and investment, clobbered by the shutdown, plunged at a 16.7% rate, hacking 1.16 percentage points off fourth-quarter growth.

For all of 2025, GDP grew 2.1%, solid but down from an initial estimate of 2.2% from 2024 and 2023.

In the fourth quarter, consumer spending grew at a 2% clip, down from 3.5% in the third quarter. Business investment, excluding housing, increased at a healthy 2.2% pace, likely reflecting money being poured into artificial intelligence, but it was down from 3.2% in the third quarter.