US Economy Expanded at Sluggish 0.7% in Q4, Government Says

Commerce Department downgrades initial estimate, citing government shutdown impact

Mar. 13, 2026 at 6:18pm

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The U.S. economy grew at an unexpectedly sluggish 0.7% annual rate in the fourth quarter of 2025, the Commerce Department reported on Friday. This was a sharp downgrade from the initial estimate of 1.4% growth, with the government shutdown and weaker consumer spending cited as key factors.

Why it matters

The slowdown in economic growth raises concerns about the broader health of the U.S. economy, which has shown resilience despite trade tensions and other policy changes under the Trump administration. The weaker-than-expected data also comes as the job market has slumped, with companies cutting over 92,000 jobs last month.

The details

Growth in gross domestic product, the nation's output of goods and services, was down sharply from 4.4% in the third quarter and 3.8% in the second quarter. The 0.7% rate was half the government's initial estimate, with federal government spending and investment plunging 16.7% due to the 43-day government shutdown. Consumer spending grew at a 2% clip, down from 3.5% in the prior quarter, while business investment increased at a 2.2% pace, down from 3.2%.

  • The U.S. economy advanced at a 0.7% annual rate from October through December 2025.
  • In the third quarter of 2025, GDP grew 4.4%.
  • In the second quarter of 2025, GDP grew 3.8%.

The players

U.S. Economy

The world's largest economy, which has shown resilience in the face of President Donald Trump's policies, including import taxes and mass deportations.

Commerce Department

The federal agency that reported the downgraded GDP growth estimate for the fourth quarter of 2025.

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What’s next

The Commerce Department will release its final report on fourth-quarter GDP growth on April 9.

The takeaway

The weaker-than-expected economic growth in the fourth quarter, along with the slump in the job market, raises concerns about the broader health of the U.S. economy and the impact of factors like the government shutdown and trade tensions on the country's economic performance.