Economic growth downgraded to 0.5 percent in fourth quarter of 2025

U.S. economic growth slowed more than previously expected during the fourth quarter of last year, according to new government data.

The Commerce Department reported on Thursday that real gross domestic product (GDP) from October, November and December — which coincided with the lengthy government shutdown — increased by an annual rate of 0.5 percent, less than the 0.7 percent estimate.

The department noted consumer spending and investment largely drove GDP growth, while decreased government spending and exports detracted from it. 

The 43-day lapse in federal funding also led to gaps in expected spending. The fourth quarter saw a 0.96 percentage point decrease in government spending.

At the state level, the percent change in real GDP rates varied, with North Dakota displaying a high increase rate of 3.8 percent. Washington, D.C., and Maryland — two areas with high numbers of federal workers — reported a decrease in real GDP rates, at -8.3 percent and -3.3 percent, respectively. 

The latest GDP growth rate estimate is a sharp decline from the third quarter in 2025, which saw an estimated 4.4 percent GDP growth, and the 3.8 percent growth rate in the second quarter. 

The overall economy grew at a rate of 2.1 percent last year, compared to 2.8 percent in 2024 and 2.9 percent in 2023. 

The new report comes as economic anxiety rises and the market staggers amid the Trump administration’s ongoing military efforts against Iran. A two-week fragile ceasefire deal announced by President Trump on Tuesday evening temporarily calmed global energy markets, but ongoing strikes in the Middle East imperil the stability of the agreement. 

Iranian counterstrikes in the Gulf region have halted the flow of trade through the Strait of Hormuz, which carries 20 percent of the global oil consumption. 

The price of Brent crude oil, the international benchmark, was trading at around $98 per barrel on Thursday morning, down from more than $110 earlier this week. U.S.-produced West Texas Intermediate crude oil was trading just less than $100 per barrel on Thursday. 

Gas prices in the U.S. have also spiked after the U.S. and Israel launched joint strikes on Tehran at the end of February. On Thursday, the average price of a standard gallon of gas was up to $4.17, compared to $3.48 from a month ago and $3.24 from a year ago, according to AAA.