US Economic Growth Slows to 0.5% in Q4 Amid Shutdown Impact and Weak Spending

US economic growth slowdown continues as Q4 GDP is revised to 0.5%, impacted by government shutdown, weak consumer spending, and declining federal investment

The US economic growth slowdown became more evident in the fourth quarter as the economy expanded at a modest 0.5% annual rate, according to revised data released by the U.S. Department of Commerce on April 9. This marks a downgrade from the earlier estimate of 0.7% and reflects the lingering impact of last fall’s 43-day government shutdown. The latest figures highlight a sharp contrast to the stronger momentum seen earlier in the year, when the economy grew 4.4% in the third quarter and 3.8% in the second.

Government Spending Decline Drags GDP
A major contributor to the US economic growth slowdown was a steep decline in federal government spending and investment, which fell at a 16.6% annual pace. This alone shaved more than one percentage point off the fourth-quarter GDP. The data underscores how policy disruptions and fiscal uncertainty can quickly ripple through the broader economy, weakening overall output.

Consumer Spending Shows Signs of Fatigue
Consumer spending, a key engine of the US economy, also showed signs of fatigue. It rose just 1.9% during the quarter, slightly below earlier projections and a notable drop from 3.5% growth in the previous quarter. Spending on goods such as automobiles and apparel slowed sharply to 0.3%, compared to 3% growth in the July–September period. This deceleration suggests that households are becoming more cautious amid economic uncertainty and fluctuating job trends.

Annual Growth Slips, Investment Moderates
For the full year 2025, the economy grew 2.1%, down from 2.8% in 2024 and 2.9% in 2023, reinforcing concerns about a broader US economic growth slowdown. Business investment rose at a 2.4% pace, supported in part by spending on artificial intelligence, but still marked a decline from the previous quarter. Additionally, a core measure of economic strength—which excludes volatile components like exports and government spending—slowed to 1.8% from 2.9%.

Outlook Uncertain Amid Global Tensions
Looking ahead, the outlook remains uncertain. Rising global tensions, particularly the U.S.-Israeli conflict with Iran, have driven up energy prices and disrupted trade flows. Meanwhile, the labor market has shown mixed signals, with job gains fluctuating sharply in early 2026. As economic pressures mount, policymakers and businesses alike will be closely watching whether growth can regain momentum in the coming months.