After humming along at a robust pace for much of 2025, the economy hit a wall in the fourth quarter, with a six-week government shutdown and slowdown in consumer spending stunting growth at the end of the year.
Gross domestic product — which measures the nation’s output of goods and services — grew at a meager 1.4% annual rate in the fourth quarter, the Commerce Department said Friday. That came in well under economists’ forecasts of roughly 2% growth and is down sharply from the previous three months, when the economy expanded at blistinerg 4.3% pace.
Yet while the GDP number was weaker than expected, analysts say the economy remains on firm ground and is likely to accelerate in the coming months.
“Today’s headline number is certainly disappointing,” eToro U.S. investment analyst Bret Kenwell told CBS News. “When you peel back the layers a little bit, it’s not quite as bad as it appears on the surface.”
The latest GDP data, which was delayed due to the recent government shutdown, was the first snapshot of fourth-quarter economic growth. The Commerce Department will deliver two more readings for the quarter in the coming months.
The government also released the Personal Consumption Expenditures, or PCE, report on Friday, the Federal Reserve’s preferred measure of inflation. Headline PCE grew at an annual rate of 2.9% in December, a sign that inflation remains sticky.
Here are other key takeaways from Friday’s GDP report.
Government shutdown tipped the scales
The main reason the economy slumped in the final three months of 2025, according to economists: the 43-day government shutdown last year, during which hundreds of thousands of federal workers were furloughed and federal funding for a range of programs came to a halt.
Gregory Daco, chief economist at consulting firm EY-Parthenon, in an email called the shutdown a “self-inflicted black eye.”
“The disappointing end to the year largely reflected a self-inflicted drag from the longest government shutdown in U.S. history,” he said.
The lapse in federal spending lasted for nearly half of the fourth quarter, stretching from October to early November. According to Friday’s GDP report, the shutdown reduced fourth-quarter growth by about 1 percentage point, largely due to a reduction in federal government services. The shutdown also contributed to a steep drop in government spending in the fourth quarter.
Consumers pulled back on spending
A slowdown in consumer spending also modestly weighed on economic activity last quarter. Spending rose by 2.4% in the final three months of the year, down from 2.9% in the third quarter.
“Spending didn’t fall off a cliff, but it certainly slowed and decelerated from the pace we had earlier this year,” Kenwell said.
Consumer spending is the nation’s main engine of growth, accounting for around two-thirds of economic activity.
Economists expect a rebound
Friday’s GDP print comes as other sectors of the economy display strength. Job growth came in higher than expected last month, with employers adding 130,000 positions. Inflation is also cooling.
With the 2025 government shutdown in the rearview mirror, analysts expect the economy to rebound this year. Investment advisory firm Capital Economics expects the economy to grow at a 3% annual rate in the first quarter of 2026.
Michael Pearce, chief U.S. economist at Oxford Economics, also thinks the economy will pick up because of softening tariff pressures and ongoing tax cuts, which he said will boost spending.
“We expect a sharp rebound in the coming months, driven by a larger tax refund season,” he said in a research note.
