US economic growth slowed sharply in the fourth quarter, as decreases in government spending related to a partial government shutdown and exports offset gains in consumer spending and investment.
Growth in gross domestic product (GDP) slowed to an annual 1.4pc in the fourth quarter, lower than analysts' estimates in a Trading Economics survey and down from 4.4pc in the third quarter, according to the Bureau of Economic Analysis (BEA).
For full-year 2025, GDP growth slowed to 2.2pc from 2.8pc in 2024 and 2.9pc in 2023.
Consumer spending grew by 2.4pc in the fourth quarter, down from 3.5pc in the third quarter. Spending on goods fell by an annual 0.1pc from 3pc in the third quarter. Spending on services slowed to growth of 3.4pc in the fourth quarter from 3.6pc in the third quarter.
Gross private fixed investment grew by 3.8pc from no change the prior quarter and a 13.8pc decline in the second quarter. Residential spending fell by 1.5pc after a 7.1pc annual decline in the third quarter.
Intellectual property products — one measure that captures growth in artificial intelligence — grew by 7.4pc in the latest quarter after a 5.6pc gain in the third quarter. Spending on equipment grew by 3.2pc after a 5.2pc gain in the prior quarter.
Exports fell by 0.9pc after a 9.6pc gain in the third quarter. Imports, which subtract from growth, fell by 1.3pc after a 4.4pc decline in the third quarter.
Federal spending fell by 16.6pc in the quarter, which was marked by the partial federal shutdown, after a 2.7pc gain in the prior quarter. The federal spending drop accounted for 1.15 percentage points of the total drop in GDP. Defense spending fell by 10.8pc after a 5.7pc gain.
The PCE price index, the Federal Reserve's favorite inflation measure, rose by 2.9pc in the quarter following 2.8pc growth in the third quarter. The Fed is targeting 2pc long-term inflation.
