U.S. economic growth slowed at the end of 2025, as consumer spending cooled and a falloff in government activity and exports weighed on output, according to new government data released Friday.
Real gross domestic product, the broadest measure of goods and services produced in the economy, grew at an annual rate of 0.7% in the fourth quarter of 2025, the Commerce Department’s Bureau of Economic Analysis said in its second estimate. That was down from a 4.4% pace in the third quarter and half the previously reported 1.4% fourth-quarter rate.
The BEA said the modest fourth-quarter increase in GDP was driven by gains in consumer spending and private investment. Those positives were partly offset by declines in government spending and exports, while imports — which subtract from GDP — also fell.
Compared with the third quarter, the deceleration in growth primarily reflected:
- A downturn in government spending
- A downturn in exports
- A slowdown in consumer spending
- A smaller decrease in imports
Those drags were only partly offset by faster growth in investment.
A closely watched gauge of underlying domestic demand, real final sales to private domestic purchasers rose at a 1.9% annual rate in the fourth quarter. That was revised down from 2.4%, pointing to somewhat softer private-sector demand than initially thought.
Price pressures remained firm at the end of the year. The price index for gross domestic purchases rose at a 3.8% annual rate in the fourth quarter, slightly higher than previously estimated.
The personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, increased 2.9% in the quarter, unchanged from the initial estimate. Excluding volatile food and energy categories, the core PCE price index rose 2.7%, also matching the earlier reading.
For all of 2025, real GDP grew 2.1%, weaker than the prior 2.2% estimate.
For the year as a whole, the price index for gross domestic purchases rose 2.6%, the same as previously reported. The PCE price index also climbed 2.6%, while core PCE increased 2.8%, both unchanged from earlier estimates.