U.S. growth downshifted sharply at the end of 2025, with the Commerce Department reporting GDP rose at 1.4% annualized in Q4, well below expectations. Several outlets pointed to the same major culprit. The 43-day federal shutdown weighed on output and also set up a familiar political fight over who takes the blame.
Under the hood, the report showed a split picture: demand held up better than the headline suggested, but the public sector drag was unusually large. CNBC noted government spending fell sharply, while Politico highlighted that consumer spending cooled during the quarter. The New York Times also framed the quarter as a slowdown after Q3’s surge, noting the drop from 4.4% growth in the third quarter.
- President Trump posted about the coming GDP miss ahead of the release, arguing the shutdown cost “at least two points” and calling for lower interest rates.
- Inflation, meanwhile, stayed sticky: core PCE (personal consumption expenditures, the Fed’s preferred inflation gauge) rose 3% year over year in December, and PBS reported prices rose 0.4% month over month.
What to watch next: economists broadly expect a post-shutdown rebound, but the mix of slower growth and firmer inflation is awkward for the Fed. Yahoo Finance said the December inflation reading is likely to keep the Fed on hold, even as officials weigh whether the Q4 growth hit proves temporary or signals a more persistent cooling.
