WASHINGTON (AP) — U.S. economic growth slowed in the final three months of last year, dragged down by a six-week federal government shutdown and a drop in consumer spending.
Gross domestic product (total production of goods and services) grew at an annual rate of 1.4% in the fourth quarter, according to the Commerce Department. reported on Fridaydown from 4.4% in the July-September period and 3.8% in the previous quarter.
The numbers suggest a slower pace of growth in coming quarters as consumers take on more debt and cut savings to keep up with spending. Business investment in external data centers and other equipment dedicated to artificial intelligence increased only at a modest pace.
Still, indicators of underlying growth, which focus on consumer and business spending, were generally resilient, economists said. A sharp slowdown in government spending due to the government shutdown reduced growth by a full percentage point.
AP AUDIO: U.S. economic growth in fourth quarter weaker than expected due to government shutdown and consumer rebound
AP Washington Correspondent Sagar Meghani reports on a key inflation measure that unexpectedly rose in December.
Consumer and business spending is continuing at a “pretty solid” pace, said Martha Gimbel, executive director of the Yale Budget Lab and former economist for President Biden. “This is not a dire report.”
Consumer spending rose 2.4%, solid growth but significantly lower than the strong 3.5% increase in the third quarter. Federal spending has fallen by nearly 17% due to the government shutdown. However, this decline should largely reverse in the coming quarters, which could provide a slight boost to growth.
The growth in extra-large sizes last summer and fall partly reflected a sharp decline in imports. Companies increased imports in the first quarter of last year ahead of President Donald Trump’s tariffs. After boosting growth rapidly in the second and third quarters, trade had little impact late last year.
Early Friday, before the statistics were released, President Trump attacked Congressional Democrats for shutting down the government last fall. He also reiterated his criticism of Federal Reserve Chairman Jerome Powell for not cutting interest rates sooner.
President Trump posted on his social media site that the Democratic shutdown cost America at least 2 percentage points of gross domestic product. “That’s why they’re doing it again in mini format. No closures! And interest rates will be lower. ‘Twice Late’ Powell is the worst!!!”
But a separate report on Friday showed that according to the Fed’s preferred metrics, inflation is: Accelerated in Decemberdue to increased prices of goods such as furniture, clothing, and food.
President Trump predicted earlier this month that GDP would rise significantly by more than 5%, even after factoring in the government shutdown. Since returning to the White House, President Trump has sought to claim the economy is in its strongest period on record, even though new government data shows growth has slowed compared to 2024.
The week’s data arrives before President Trump delivers his State of the Union address on Tuesday, where he is expected to say the economy is booming.
The report also highlights some strange aspects of the US economy. That means the U.S. economy is growing steadily, but it’s not creating many jobs. Growth in 2025 was a fairly healthy 2.2%, but last week’s government report found that employers Less than 200,000 jobs Last year was the lowest year since the coronavirus outbreak in 2020.
Economists have pointed to several possible reasons for this difference. The Trump administration’s crackdown on immigration has sharply slowed population growth and reduced the number of people able to find jobs. That’s one reason why the unemployment rate rose only slightly last year, from 4% to 4.3%, even though employment was almost zero.
Some companies may also be holding back on adding jobs due to uncertainty about whether artificial intelligence will allow them to increase production without finding new employees. In addition, the cost of tariffs may reduce profits for many companies, leading to job cuts.
The current economic situation is unusual, with strong economic growth, slightly slower inflation, and low unemployment, but surveys show that Americans are generally pessimistic about the economy. Consumer confidence indicators fell to their lowest levels in January. Lowest level since 2014Yet consumers continue to spend, driving growth.
Some of that spending may be disproportionately driven by higher-income consumers. “K-shaped” economy. But data from many large banks suggests that lower-income consumers are still spending more, though not by as much.
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Associated Press writer Josh Boak contributed to this article.
