WASHINGTON, Feb. 20, 2026 — U.S. economic output grew at a 1.4% annual rate in the fourth quarter of 2025, a sharp slowdown from the prior quarter, according to the Bureau of Economic Analysis, the BEA said.
The deceleration followed last fall’s 43-day government shutdown, which pushed federal spending down and contributed to the weakest quarterly growth since early 2024, Reuters reported.
Shutdown drag and spending mix
Consumer spending rose 2.4% in the quarter, down from 3.5% in Q3, and federal government outlays fell nearly 17%, the Associated Press reported, reflecting reduced services and delayed spending during the shutdown.
The nonpartisan Congressional Budget Office estimated the shutdown cut about 1.5 percentage points from fourth-quarter growth and could leave $7 billion to $14 billion in output permanently lost, according to The Guardian.
Inflation and policy backdrop
Inflation remained firm alongside the weaker GDP print: the core personal consumption expenditures price index rose 3.0% in December, CNBC reported, keeping pressure on the Federal Reserve to stay cautious.
President Donald Trump blamed the shutdown for the soft data and again urged lower interest rates in a social media post ahead of the release, Reuters said.
Outlook for 2026
A measure of underlying demand — real final sales to private domestic purchasers — grew 2.4%, the BEA said, suggesting consumers and businesses still provided a steady base.
Economists expect some rebound in early 2026 as delayed federal spending is restored, though they caution that consumer balance sheets and trade swings could limit the bounce, Reuters reported.
For all of 2025, real GDP rose 2.2%, down from 2.8% in 2024, the AP reported, underscoring a cooler but still expanding economy.
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Image: “US Capitol west side” by Martin Falbisoner, CC BY-SA 3.0. Source: https://commons.wikimedia.org/wiki/File:US_Capitol_west_side.JPG. License: https://creativecommons.org/licenses/by-sa/3.0/. Modifications: cropped and resized to 1920×1080 (16:9).
