Most of the drag on gross domestic product from the 43-day shutdown, however, will likely be reversed in the first quarter.
Ahead of the release of the Commerce Department’s report on Friday, President Donald Trump flagged the sharper-than-expected slowdown in GDP growth, posting on social media that the “Shutdown cost the U.S.A. at least two points in GDP. That’s why they are doing it, in mini form, again. No Shutdowns! Also, LOWER INTEREST RATES.”
Trump is unlikely to get his wish for rate cuts from the Federal Reserve anytime soon, with other data on Friday showing inflation accelerated in December and is poised to rise further in January. Inflation is being partly driven by Trump’s import tariffs. The U.S. Supreme Court on Friday struck down the tariffs Trump imposed under a law meant for use in national emergencies, saying he had overstepped his authority.
“The core of the economy is resilient,” said Michael Pearce, chief U.S. economist at Oxford Economics. “With the economy and labor market stabilizing and inflation still elevated, we expect the Fed will remain on prolonged hold.”
GDP increased at a 1.4% annualized rate in the fourth quarter, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate. Economists polled by Reuters had forecast GDP would rise at a 3.0% pace. The economy grew at a 4.4% pace in the third quarter. It grew 2.2% last year, the slowest pace in five years, after expanding 2.8% in 2024.
Federal government spending decreased at a 16.6% rate last quarter, the largest drop since the third quarter of 1972, reflecting fewer services provided by public workers, lower outlays on goods and services and a temporary reduction in benefits from the Supplemental Nutrition Assistance Program during the recent shutdown.
Federal government spending sliced off 1.15 percentage points from GDP growth, the most since the first quarter of 1994. The nonpartisan Congressional Budget Office had estimated the shutdown would subtract 1.5 percentage points from fourth-quarter GDP, and forecast most of the lost output would eventually be recovered, though between $7 billion and $14 billion would not.
But the economy held up in the final three months of the year, thanks to a still-healthy pace of consumer spending and business investment in artificial intelligence.
Growth in income at the disposal of households after accounting for inflation stalled, while the saving rate fell to 3.6% from 4.2% in the third quarter. Consumer spending could get a boost from what economists anticipate will be larger tax refunds this year because of the White House’s tax cuts.
“Fiscal stimulus should provide a lift to overall economic growth due to a large increase in tax refunds for consumers and lower tax burdens throughout the year and tax incentives for businesses that should encourage increased business capital expenditures even outside of the AI surge that continues,” said Kathy Bostjancic, chief economist at Nationwide.
Business spending on intellectual property products surged at a 7.4% rate, mostly reflecting research and development linked to AI. But investment in structures like factories contracted for an eighth straight quarter, while growth in equipment spending slowed from the third quarter.
DOMESTIC DEMAND REMAINS SOLID
Trade made a small contribution to GDP in the fourth quarter and inventories provided a lift despite businesses drawing down stocks for a third straight quarter. Residential investment contracted for a fourth straight quarter amid higher borrowing costs.
Final sales to private domestic purchases, which excludes government, trade and inventories, grew at a 2.4% rate. This measure of domestic demand, closely watched by policymakers, increased at a 2.9% pace in the July-September quarter.
With demand holding up, inflation heated up last quarter. The price index for gross domestic purchases, which measures prices paid by U.S. residents for goods and services, increased at a 3.7% rate. That reading was the fastest in three years and followed a 3.4% pace of increase in the third quarter.
The rise in price pressure occurred at the end of the quarter, and economists believed it spilled over into January. A separate report from the BEA showed the Personal Consumption Expenditures Price Index, excluding the volatile food and energy components, increased 0.4% in December after gaining 0.2% in November. In the 12 months through December, the so-called core PCE inflation advanced 3.0% after increasing 2.8% in November.
It is one of the measures tracked by the U.S. central bank for its 2% inflation target. Economists estimated core PCE inflation could increase by as much as 0.4% on a monthly basis in January, noting a surge in prices of legal services last month.
That rise would translate to a year-on-year advance in the core PCE inflation of 3.1%. Economists do not expect the Fed to cut rates before its June 16-17 meeting.
PCE inflation last month was boosted by a 0.4% increase in the cost of goods, mostly recreational goods and vehicles, clothing and footwear as well as furnishings and durable household equipment. Services prices rose 0.3%, lifted by housing and utilities, and recreation services. The cost of dining out and staying in hotels and motels shot up 0.9%, the most since October 2023. Financial services and insurance prices rose strongly.
Información extraída de: https://www.reuters.com/world/us/us-economic-growth-slows-sharply-fourth-quarter-2026-02-20/
