The U.S. economy “finished the year on a softer note,” reported the Wall Street Journal, impacted by a record-long government shutdown last fall and slower consumer spending growth.
In the fourth quarter of 2025, U.S. gross domestic product (GDP)—the value of all goods and services produced across the economy—rose at a 1.4% seasonally- and inflation-adjusted annual rate, much weaker than the 2.5% reading economists surveyed by WSJ expected.
The extended government shutdown squeezed the economy in many ways, from missed paychecks for hundreds of thousands of federal employees to government contractors losing out on business.
According to the New York Times, the effect of the shutdown will be temporary as furloughed workers eventually received back-pay, and growth should rebound by a similar amount in early 2026.
Throughout 2025, the U.S. economy contracted in the first quarter, grew quickly in the next two, and then cooled at the end of the year.
“Given the volatility in the quarterly data, many economists instead focused on the year as a whole. GDP increased 2.2% in 2025, measured from the end of 2024, compared with 2.3% the previous year. That represented solid growth, once again surprising forecasters, who in recent years have repeatedly predicted slowdowns or outright recessions, only to see growth continue,” the NYT reported.
Business investment grew 3.5% in the fourth quarter of 2025, driven by the AI industry’s need for data centers and electricity to power them. “The AI boom helped mask weakness elsewhere in the economy. Construction of new factories fell in 2025. So did home building. … The reliance on AI could make the economy vulnerable if investors sour on the industry. So far, however, most forecasters are predicting that growth will accelerate in 2026,” NYT reported.
Separate data from the Commerce Department in February showed that consumer prices rose 2.9% in December from a year earlier, the fastest pace since March 2024, NYT wrote. At the same time, consumer spending increased at a 2.4% rate in the fourth quarter and grew 2.2% over the full year. But that spending was concentrated among wealthier households.
Join your peers at the NACS State of the Industry Summit April 14-16 in Schaumburg, Illinois, for the session “The Economic Narratives and Realities Shaping 2026” to hear about the latest economic metrics.