U.S. GDP Growth Slows in Q4 2025
Real GDP increased at an annual rate of 1.4% in the fourth quarter of 2025, down from a 4.4% rise in the third quarter and below consensus expectations. The increase in GDP during the fourth quarter mostly reflected increases in consumer spending and investment, which were partially offset by reductions in government spending and exports. In 2025, real GDP grew at an annual rate of 2.2%, down from 2.8% in 2024. The increase in GDP in 2025 mostly reflected a 2.7% rise in consumer spending, which was partially offset by a reduction in nondefense, federal government spending, which fell 4.2%.
Consumer spending grew at an annual rate of 2.4%, down from a 3.5% increase in the third quarter, with spending on services (up 3.4%) contributing to the gain, while spending on goods declined (down 0.1%). Consumer spending on nondurable goods ticked up 0.4%, but spending on durable goods fell 0.9% after rising 1.6% in the third quarter. The rise in nondurable goods consumer spending was driven by clothing and footwear and other nondurable goods, with declines in other nondurable goods categories. Meanwhile, the decline in consumer spending on durable goods was driven by motor vehicles and parts. Within services, spending increases were relatively widespread, with health care being the largest contributor to the gain.
Investment grew 2.6% at an annual rate in the fourth quarter, after ticking up 0.8% in the third quarter. The improvement was driven by a 7.4% surge in intellectual property products investment, up from 5.6% in the third quarter. Meanwhile, business spending on structures declined 2.4%. Exports dropped 0.9% in the fourth quarter, with the decline entirely concentrated in goods exports (down 1.8%). At the same time, imports fell 1.3% in the fourth quarter, with the decline also entirely concentrated in goods (down 2.8%). The plummet in federal government spending (down 16.6%) was driven by the extended government shutdown in the fourth quarter. Meanwhile, state and local government spending increased 2.4% in the fourth quarter, up from the 2.0% rise in the prior quarter.