On Friday, February 20th, the latest economic data released by the U.S. Department of Commerce showed that due to the government shutdown, the economic growth in the fourth quarter of 2025 slowed more than expected in the United States. At the same time, a key inflation indicator showed that high prices continue to be a constraint on economic growth.
According to the data from the U.S. Department of Commerce, the annualized GDP growth rate for the fourth quarter of 2025 was 1.4%, far below the Dow Jones’ expected 2.5%.
The overall economic growth rate for the United States in 2025 was 2.2%, lower than the 2.8% seen in 2024.
Meanwhile, a core inflation indicator closely watched by Federal Reserve officials showed that the inflation rate remained high in December.
The Personal Consumption Expenditures Price Index (PCE) rose by 2.9% year-on-year, exceeding expectations by 0.1 percentage points. The core PCE index, which excludes food and energy prices, increased by 3% year-on-year. This data is in line with market expectations but still significantly higher than the Fed’s 2% target level.
Both of these indices rose by 0.4% from the previous month, surpassing the earlier expectation of 0.3%.
The U.S. Department of Commerce stated that the slowdown in GDP growth from 4.4% in the third quarter to 1.4% in the fourth quarter was due to a decline in consumer spending and exports.
Personal consumption expenditures, which serve as a key indicator of consumer spending, grew by 2.4% in the fourth quarter, lower than the 3.5% growth seen in the third quarter. After a surge of 9.6% in the third quarter, exports declined by 0.9% in the fourth quarter.
Despite the overall weakness in GDP data, the potential demand remains strong.
Another key indicator for the Federal Reserve, the domestic final sales to private domestic purchasers, increased by 2.4% this quarter, a decrease of 0.5 percentage points from the previous quarter but still indicating robust potential demand for the $31.5 trillion U.S. economy.
Additionally, domestic private investments increased by 3.8% this quarter after remaining flat in the third quarter.
On the other hand, government spending and investments decreased by 5.1%, with federal government spending plummeting by 16.6% while state and local government spending increased by 2.4%.
Heather Long, Chief Economist at the Naval Federal Credit Union, stated, “The government shutdown at the end of 2025 has damaged economic growth. There may be a rebound in the economy in early 2026.”
“In general, despite facing many adverse factors, the U.S. economy remained resilient in 2025. Strong consumption and the vibrant development of artificial intelligence have driven economic growth,” he said.
Just before the release of the data on Friday, President Trump posted that the GDP data might be weak, attributing it to the government shutdown that ended in November, while also urging the Federal Reserve to lower interest rates.
The Federal Reserve lowered its benchmark interest rate by 0.75 percentage points throughout 2025. However, as officials assess progress on inflation and risks in the labor market, the Fed has signaled a more cautious approach to further rate cuts.