WASHINGTON, February 25 — US GDP growth for 2025 reached an annual rate of 2.2%, underscoring economic resilience over the year despite a marked slowdown in the fourth quarter, official data from the U.S. Bureau of Economic Analysis (BEA) showed this week .
The full-year figure reflected continued consumer spending and business investment, though a lengthy government shutdown and weaker export performance weighed on overall momentum in late 2025.
Economists describe the performance as modest, with growth slower than in prior years but still above some long-term potential estimates.
Government Shutdown and Late-Year Slowdown
The U.S. economy expanded 1.4% annually in the fourth quarter, considerably below economists’ earlier forecasts and well under the 4.4% pace seen in the third quarter, according to BEA’s advance estimates .
The contraction in government spending during a 43-day federal shutdown — the longest in U.S. history — was cited as a significant drag on activity, accounting for a large portion of the quarter’s slower performance. Federal outlays on employee compensation and government services declined sharply, subtracting from overall GDP growth in the period.
President Donald Trump criticized the data, blaming the slowdown on the impasse in federal operations, though analysts noted that private demand helped offset some of the drag.
Consumer Spending and Business Investment Cushion Growth
Despite the weak close to the year, household consumption — which accounts for more than two-thirds of GDP — remained a pillar of growth. Consumer spending rose moderately through the year, particularly on services, although big-ticket goods such as vehicles saw slower demand.
“Steady consumer demand helped keep the economy growing,” said one economist familiar with the BEA data, noting that continued spending on healthcare, travel and household services supported broader activity.
Business investment also contributed to growth, particularly in areas linked to research and development and equipment, including information technology and artificial intelligence-related capital expenditures. These investments helped offset slower government demand and softer export performance.
Inflation, Labor Market and Policy Implications
While growth persisted, inflation pressures remained a central concern for policymakers. Measures such as the personal consumption expenditures price index and core inflation remained above the Federal Reserve’s long-term 2% target, complicating monetary policy decisions.
Atlanta Federal Reserve Bank President Raphael Bostic described the 2.2% GDP expansion as “notably strong given the disruptions,” and warned that continued resilience could sustain inflation above target, delaying the prospect of rate cuts. Bostic also projected potential acceleration in 2026 growth to around 2.4% if investment and consumer activity remain robust .
Labor markets showed mixed signals. Although job creation was modest relative to previous years, unemployment remained near historically low levels, supporting consumer confidence and spending — critical components of GDP growth.
Broader Economic Context
The overall U.S. economy has demonstrated steady expansion in recent years, remaining the world’s largest by nominal GDP and a major engine of global growth . Still, the pace of growth in 2025 was slower than the 2.8% rate in 2024, reflecting headwinds from fiscal disruptions and trade policy uncertainties.
Trade balances also influenced performance, as imports and exports fluctuated throughout the year, reducing net contributions to GDP. High borrowing costs and tariff-related costs were cited as factors that weighed on certain sectors.
Economists emphasize that while annual growth was positive, the late-year deceleration highlights underlying fragilities in the recovery. Weaknesses in exports and government sector demand, alongside uneven labor market outcomes, suggest that gains were unevenly distributed across the economy.
Market and Policy Response
Financial markets responded with a muted reaction following the GDP release, with U.S. equity indices trending modestly higher amid investor focus on earnings and inflation data.
Bond markets showed mixed signals, as yields fluctuated on expectations about the Federal Reserve’s next move. A sustained 2% inflation target by the Fed, amid growth exceeding potential, has led analysts to predict that monetary policy will remain restrictive into mid-2026.
Policy discussions in Washington have also centered on fiscal measures to support growth without exacerbating long-term debt levels, now at historically high levels following successive stimulus packages and budget deficits.
Outlook for 2026
Looking ahead, economists forecast potential for growth acceleration in 2026 if consumer spending remains stable and business investment continues its upward trend. A reduction in fiscal disruptions and easing tariff headwinds could also support broader economic momentum.
However, risks remain from persistent inflation pressures, uneven employment rebounds, and geopolitical uncertainties that could influence trade and capital flows.
For now, the 2.2% US GDP growth rate for 2025 signals resilience amid a complex economic backdrop, even as late-year weakness underscores persistent challenges facing policymakers and businesses alike.