U.S. Growth Slows Sharply — GDP Misses at 1.4%

Government shutdown dents momentum while inflation firms at 3%.

Published Feb 20, 2026

The U.S. economy slowed more than expected in the fourth quarter of 2025, growing at an annualized rate of just 1.4% — well below the 2.5% estimate.

A record-length government shutdown shaved roughly one full percentage point off growth, according to the Commerce Department, contributing to weaker consumer spending and exports.

What Drove the Slowdown

• Consumer spending rose 2.4%, down from 3.5% in Q3
• Exports fell 0.9% after surging 9.6% previously
• Government spending dropped 5.1%
• Federal spending plunged 16.6%
• Gross private domestic investment rose 3.8%

Inflation Still Running Hot

While growth cooled, inflation showed little sign of easing.

• Core PCE (Fed’s preferred gauge): 3.0% year-over-year
• Headline PCE: 2.9%
• Both rose 0.4% for the month
• Goods +0.4%, Services +0.3%

Inflation remains well above the Federal Reserve’s 2% target, complicating expectations for future rate cuts after three reductions late in 2025.

The Bigger Picture

For all of 2025, the U.S. economy grew 2.2%, down from 2.8% in 2024.

Despite the weak headline number, underlying demand remained relatively solid. Final sales to private domestic purchasers rose 2.4%, suggesting core economic momentum may be stronger than the GDP print alone indicates.