The U.S. economy lost momentum in the final months of 2025, as softer consumer spending and a federal government shutdown dragged on growth.
Gross domestic product expanded at an annualized 1.4% in the fourth quarter, down sharply from 4.4% in the previous period.
The slowdown capped a turbulent year shaped by new tariffs, immigration crackdowns, fiscal tightening, and stubborn inflationary pressures.
Despite volatility, the economy grew 2.2% in 2025, outperforming expectations amid policy shifts and external headwinds.
Trade disruptions fueled sharp swings. Early contraction reflected a surge in imports, as firms accelerated shipments ahead of anticipated tariff hikes.
Growth rebounded midyear as imports cooled, before slowing again in late 2025 when trade deficits widened and import volumes climbed.
Economists said the government shutdown proved a larger-than-expected drag, with the Commerce Department estimating it shaved one percentage point off quarterly GDP.
Meanwhile, the Federal Reserve’s preferred inflation gauge, the PCE price index, rose to 2.9%, underscoring persistent price pressures.
