Washington (United States) (AFP) – US economic growth cooled much more than expected in the final months of 2025, government estimates showed Friday, capping the first year of Donald Trump’s return to the presidency. The Republican leader was quick to blame a lengthy government shutdown last year for the deceleration, pinning responsibility on Democratic lawmakers in a social media post before the latest data was released.
The world’s biggest economy expanded at a 1.4 percent annual rate in the October to December period, the Department of Commerce said. This was significantly below the 2.5 percent pace that analysts had forecasted for the quarter. Full-year GDP growth came in at 2.2 percent in 2025, lower than the 2.8 percent figure for the prior year. “The Democrat Shutdown cost the U.S.A. at least two points in GDP,” Trump wrote in a Truth Social post, about a half-hour before the official results were published. He also pointed the finger again at the Federal Reserve, bashing outgoing Chairman Jerome Powell and calling for “LOWER INTEREST RATES.”
In an unusual move, Trump ushered reporters out from a working breakfast with governors after the GDP report was released. Analysts generally expect any hit to economic growth from the record-long shutdown, which lasted from October to mid-November, to be temporary. But some warn of repercussions from prolonged stoppages. “At first glance the first reading of fourth quarter GDP was very disappointing,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “However, the government was shut down for almost half the quarter,” he added.
Some analysts estimate that if the shutdown hadn’t occurred, fourth quarter GDP growth would have been closer to 2.4 percent, Zaccarelli said, but conceded this is hard to predict accurately.
– Consumers, AI investment –
“Solid consumption and the AI boom kept the economy growing,” said Navy Federal Credit Union chief economist Heather Long. But she added in a note that 2025 was also a year of jobless growth “where hiring was anemic during the expansion and that left many Americans frustrated and uneasy.” The Commerce Department said slower fourth quarter growth “reflected downturns in government spending and exports and a deceleration in consumer spending.” This was partially offset by a pick-up in investments. The fourth quarter figure was a marked slowdown too from the 4.4 percent growth in the third quarter. Yet, the economy saw a boost from consumer spending and investment in the year overall.
The US economy expanded at a decent clip last year despite warnings that Trump’s economic policies — ranging from sweeping global tariffs to deportations — could weigh on growth. This has not immediately taken place. Consumption has driven growth as households kept spending despite the squeeze from stubborn inflation and a weaker jobs market. But many Americans, particularly from middle- and lower-income families, have become more conscious of prices, turning increasingly to warehouse stores as they tighten their budgets.
Bernard Yaros of Oxford Economics told AFP that fourth quarter GDP was helped by business investment. The artificial intelligence capital expenditure cycle “is a major driver of the strength on the investment side of the economy,” he said. Yet, while AI investments and spending by well-off families have powered the economy, it remains unclear if households feel uplifted.
– Fed divisions –
A separate government report Friday showed that the Federal Reserve’s preferred measure of inflation picked up a touch more than analysts expected as well. The personal consumption expenditures (PCE) price index was up 2.9 percent from a year ago in December, higher than the 2.8 percent economists anticipated and also above November’s figure. This underscores the Trump administration’s challenges as he tries to convince Americans of his economic successes. Analysts say this could bring complications to the central bank too.
Zaccarelli expects the GDP report will “prolong the disagreement” between Fed officials who want to keep interest rates higher to fight inflation, and those who want to slash rates sooner to help an economy that may be more fragile than expected.
© 2024 AFP
