US economy grows 0.5% in Q4; shutdown, weak consumption weigh on pace

The US economy grew at a sluggish 0.5% annual pace in the October–December quarter, lower than earlier estimates, as a prolonged government shutdown weighed on activity, AP reported.The Commerce Department revised down its estimate of fourth-quarter GDP growth from 0.7% to 0.5%, marking a sharp slowdown from 4.4% growth in the July–September period and 3.8% in April–June.Federal government spending and investment contracted at a steep 16.6% annual rate due to the 43-day shutdown, shaving 1.16 percentage points off GDP growth.Consumer spending, which accounts for a major share of economic activity, rose 1.9%, lower than previous estimates and down from 3.5% in the second quarter. Spending on goods such as cars and clothing grew just 0.3%, compared with 3% in the preceding quarter.For the full year 2025, the US economy expanded 2.1%, slowing from 2.8% in 2024 and 2.9% in 2023.Business investment excluding housing grew at a 2.4% pace, likely supported by spending on artificial intelligence, though it moderated from 3.2% in the previous quarter.A key measure of underlying economic strength-- which includes consumer spending and private investment but excludes volatile components like exports, inventories and government spending--rose at a slower 1.8% pace, down from 2.9% in the third quarter.The economic outlook remains uncertain amid rising energy prices and global disruptions following the US-Israel conflict with Iran.The labour market has shown mixed signals, with hiring weakening last year to its slowest pace outside a recession since 2002. In 2026, employers added 1,60,000 jobs in January, cut 1,33,000 in February, and added a stronger-than-expected 1,78,000 jobs in March.Thursday’s report is the Commerce Department’s final estimate for fourth-quarter GDP. The first estimate for January–March growth is scheduled to be released on April 30.