Slower-than-expected US growth in late 2025

The US economy, crippled by the 43-day government shutdown last autumn, grew at an unexpectedly low rate of 0.7% (annualised) from October to December, according to the Commerce Department, in a significant downward revision of its initial estimate. Meanwhile, inflationary pressures persisted at this start of the year. While between promises of a revival and tariffs on trade, it is a worrying economic picture that of the US, which had already entered a problematic phase before Donald Trump's unleashed war against Iran upset the oil and financial markets.

GDP growth was half of the initially estimated 1.4 % (also annualised), which is disappointing for economists who had expected an upward revision. The expansion also fell sharply from 4.4 % in Q3 2025 and 3.8 % in Q2.

Over the full year 2025, GDP grew by 2.1 per cent, a solid figure but lower than the initial estimate of 2.2 per cent and 2.8 per cent in 2024 and 2.9 per cent in 2023.

In the fourth quarter, federal government spending and investment, hard hit by the record shutdown, plummeted by 16.7%, reducing fourth quarter growth by 1.16 percentage points. Consumer spending grew by 2 per cent, less than the 3.5 per cent in the third quarter and the 2.4 per cent initially estimated. Business investment, excluding real estate, rose 2.2 per cent, driven by investment in AI, but the increase was less than the 3.2 per cent in Q3 and the 3.7 per cent initially expected. Exports also fell by 3.3%, more sharply.

And while the labour market is in crisis, inflationary pressures are increasing. The personal consumption expenditures price index, the Federal Reserve's preferred inflation indicator, rose 0.3% month-on-month in January, up 2.8% from the same month in 2025. Core inflation, which excludes the more volatile food and energy prices, stood at 0.4 per cent month-on-month and 3.1 per cent year-on-year. This is one percentage point higher than the Fed's 2% target.