United States: Growth Slowed at the End of 2025

Although still positive, US real GDP growth in the last quarter of 2025 was nonetheless a source of disappointment. Consensus expectations had called for an increase of more than 3%. Real‑time estimates, including the Atlanta Fed’s Nowcast, were also pointing to a 3% gain as of yesterday, and had even exceeded 4% and 5% in recent weeks. The US economy therefore appears less “hot” than anticipated, as President Trump likes to say. Today’s result is closer to what we were expecting last fall.

The impact of the federal shutdown proved to be much greater than expected. While most monthly indicators suggested that the effects would remain relatively modest, the national accounts painted a different picture. The Bureau of Economic Analysis interpreted the shutdown as an increase in the cost of services provided by the federal government. This resulted in a 24.1% decline in real federal non‑military spending and a -0.7% contribution to annualized real GDP growth. A rebound in this category can likely be expected as early as the first quarter of 2026.

Excluding the public sector, final domestic demand grew at an annualized rate of 2.4%. This was weaker than the 2.9% posted in the previous two quarters but still offers a somewhat more flattering picture than what real GDP alone suggests. Annualized growth in real consumption eased to 2.4%, notably due to a decline in durable goods, including automobiles. Household spending on services remained strong.

On the investment side, non‑residential construction remained weak, marking an eighth consecutive quarterly decline despite strong demand for data centres. Investments linked to artificial intelligence accelerated again in the last quarter of 2025, with annualized gains of 36.1% in computer equipment and 7.1% in software. Excluding these components, the contribution of non‑residential investment to real GDP would have been negative. Inventory accumulation fell for a third straight quarter, as businesses continued to run down the large stockpiles they built early in the year in anticipation of tariff announcements from the White House.

In terms of trade flows, exports declined. Until very recently, a gain had been expected, although December data released yesterday altered that outlook. Imports also decreased, but slightly less than forecast. As a result, the contribution from net exports was weaker than anticipated, accounting for a large share of the shortfall in real GDP growth relative to expectations.

Today’s data highlight the resilience of several parts of the US economy, particularly household spending on services and investments related to artificial intelligence. However, they also reveal increased fragility in other areas, especially in the remaining segments of business investment. Political developments—including the Trump administration’s trade policy and the shutdown—had significant consequences for growth at the end of 2025. Looking ahead to early 2026, some indicators point to more softness in consumer spending, while adverse weather could also play a role. Conversely, a post‑impasse rebound, and the eventual effects of last year’s fiscal changes could offer more support.