US economy grew a sluggish 0.5% in fourth quarter, government says, downgrading previous estimate

WASHINGTON (AP) — The American economy, slowed by last fall’s 43-day government shutdown, grew at a sluggish 0.5% annual pace from October through December, the Commerce Department reported Thursday in downgrade of its previous estimate.

U.S. gross domestic — the nation’s output of goods and services — decelerated in the fourth quarter after registering impressive growth of 4.4% from July through September and 3.8% from April through June. The latest number was marked down from the Commerce Department’s previous estimate of 0.7% fourth-quarter growth.

Federal government spending and investment fell at a 16.6% annual pace because of the shutdown, lopping 1.16 percentage points off fourth-quarter GDP growth. Consumer spending expanded at a 1.9% pace, down a notch from the previous estimate and from 3.5% in the second quarter.

For all of 2025, the economy grew 2.1% last year, slower than 2.8% in 2024 and 2.9% in 2023.

The economic outlook for this year is hazy after the U.S.-Israeli war with Iran drove up energy prices and disrupted global commerce.

America’s job market slumped last year — recording the weakest hiring outside a recession since 2002 — but has been up and down so far in 2026: Employers added a healthy 160,000 jobs in January, slashed 133,000 in February, then created a surprising 178,000 in March.

Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP. The first look at January-March economic growth is due April 30.