The growth of the US economy weakened more than expected at the end of 2025.
In the fourth quarter, gross domestic product (GDP) rose by an annualized 1.4 percent compared to the previous quarter, as the Commerce Department announced on Friday, according to an initial survey in Washington. Economists had expected an average of 2.8 percent. In the third quarter, GDP increased by 4.4 percent.
The temporary partial closure of federal authorities (shutdown) weighed on economic growth. It was the longest shutdown in US history. The authority announced that growth was therefore one percentage point lower. Federal government spending in Washington fell an annualized 16.6 percent in the fourth quarter. US President Donald Trump blames the opposition for the decline in growth. “The ‘democratic’ shutdown cost the US ‘at least’ two percentage points in growth,” Trump wrote shortly before the data was published.
“But it also seems that the recently weaker labor market and higher tariffs are leaving their mark,” comments Thomas Gitzel, chief economist at VP Bank. Private consumption continued to be the most important growth driver. But here too, growth began to weaken.
“In addition, the long-term consequences of Elon Musk and the Doge authority could have had a stressful effect,” writes Dirk Chlench, economist at Landesbank Baden-Württemberg. The billionaire Musk had tried to implement savings in the federal authorities. Meanwhile, Chlench sees a two-tiered economy: “Investments in commercial buildings, investments in residential buildings, investments in the vehicle fleet, in industrial plants, all fell. But IT investments increased at an annual rate of no less than 50 percent.”
It remains unclear how the data will affect the US Federal Reserve’s future monetary policy. US President Donald Trump had repeatedly exerted strong pressure on the Fed and called for significant interest rate cuts. Federal Reserve Chairman Jerome Powell’s term ends in May. Trump has nominated Kevin Warsh as his successor.
“The Fed is unlikely to allow itself to be pressured into taking quicker action by the unexpectedly weak growth figures in the fourth quarter,” expects Christoph Balz, economist at Commerzbank. “But we continue to assume that the Fed will only lower interest rates towards the middle of the year, when the new central bank chief comes into office.”
In the USA, economic growth data is published on an annualized basis. This method is not used in Europe, which is why the numbers are not directly comparable. To get a growth rate comparable to Europe, you would have to divide the US rate by four. According to the data, the fluctuations on the financial markets were limited.
