US Economic Growth Likely Slowed in Q4 2025

Disruptions from government shutdown and moderation in consumer spending expected to impact GDP

Published on Feb. 28, 2026

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U.S. economic growth likely slowed to a still-solid pace in the fourth quarter of 2025 due to disruptions from the previous year's government shutdown and a moderation in consumer spending. However, tax cuts and investment in artificial intelligence were expected to drive activity in 2026.

Why it matters

The report is expected to highlight a jobless economic expansion and a 'K-shaped' economy, where upper-income households are doing well while lower-income consumers are struggling amid high inflation and stalling wage growth. This has created an affordability crisis for many Americans.

The details

GDP probably increased at a 3.0% annualized rate in Q4 2025, down from 4.4% in Q3. The trade deficit widening to a five-month high in December led the Atlanta Federal Reserve to cut its GDP estimate to 3.0% from 3.6%. The government shutdown was estimated to have subtracted 1.5 percentage points from Q4 GDP. Growth in consumer spending is expected to have slowed from the prior quarter's 3.5% pace, driven largely by higher-income households. Business investment related to AI is expected to offset any trade drag on GDP.

  • The Commerce Department will publish its advance estimate of Q4 2025 GDP on Friday.
  • The government shutdown lasted a record 43 days.

The players

Diane Swonk

Chief economist at consulting firm KPMG.

Gregory Daco

Chief economist at EY-Parthenon.

Sal Guatieri

Senior economist at BMO Capital Markets.

Lou Crandall

Chief economist at Wrightson ICAP.

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What they’re saying

“We'll end the year still on a solid note in terms of growth, but it doesn't really translate to feel as good as it looks on paper to most Americans.”

— Diane Swonk, Chief economist at KPMG (Reuters)

“You have a confluence of shocks affecting the U.S. economy. You have on the one hand the drag from higher prices, tariffs, trade restrictions and reduced immigration, but also the boost from AI investment and the continued strong momentum in terms of stock prices supporting ongoing spending by the more affluent consumers.”

— Gregory Daco, Chief economist at EY-Parthenon (Reuters)

“Getting richer is one thing, but most households rely on incomes to pay bills, and real disposable income pretty much stalled in the quarter.”

— Sal Guatieri, Senior economist at BMO Capital Markets (Reuters)

“The year-on-year growth rate of the core has shown essentially no progress since mid-2024. Many Fed officials anticipate at least some improvement in the coming months, but they will want to see that show up in the actual numbers.”

— Lou Crandall, Chief economist at Wrightson ICAP (Reuters)

What’s next

The Federal Reserve will be closely watching the December Personal Consumption Expenditures inflation data, due to be released at the same time as the GDP report, for signs of improvement in core PCE inflation.

The takeaway

The Q4 2025 GDP report is expected to highlight the uneven nature of the economic recovery, with upper-income households faring better than lower-income consumers amid high inflation, stalling wage growth, and an affordability crisis. However, investment in AI and tax cuts are expected to provide a boost to growth in 2026.