4th Quarter GDP Report Is Now in, and It Could Be Better

The 4th quarter 2025 economic data is in, and, well, it could have been better. Key figures include GDP growth, which fell short of estimates, coming in at 1.4 percent instead of the 2.5 percent predicted, and inflation, which is still stuck at 3 percent.

All this and more data came out early Friday.

U.S. growth slowed more than expected near the end of 2025 as the government shutdown impacted spending and investment, while a key inflation metric showed high prices are still a factor for the economy, according to data released Friday.
Gross domestic product rose at an annualized rate of just 1.4%, according to the Commerce Department, well below the Dow Jones estimate for a 2.5% gain.
Consumer spending increased at a slower pace for the period while government spending tumbled sharply in a quarter marked by the record-length shutdown. The department estimated that the shutdown subtracted about 1 percentage point from growth, though it added that the exact impacts “cannot be quantified.”
For the full year in 2025, the U.S. economy grew at a 2.2% pace, down from the 2.8% increase in 2024.

Consumer spending is generally regarded as a metric indicative of consumer confidence in the economy; people in general aren't buying new sofas and going out for dinner if they're worried about their bank accounts.

At least one economist is pointing at the federal government's Schumer Shutdown as part of the reason for the slow growth.

“The Federal government shutdown clearly sent the economy careening off its strong growth path in the fourth quarter which is a one-off that won’t be repeated in early 2026,” said Chris Rupkey, chief economist at Fwdbonds.

Of course, there is a partial shutdown at the moment, but it won't have the impact the Schumer Shutdown did.

President Trump has been managing expectations:

Just before the data release, President Donald Trump warned that the GDP number would be soft, blaming it on the government shutdown that ended in November.

All in all, the report could have been better, but there are a few hints of silver linings:

Though the headline GDP number looked weak, underlying signs of demand were strong.
Another key Fed metric, called final sales to private domestic purchasers, posted a 2.4% increase for the quarter, half a percentage point lower than the prior quarter but still indicative of solid underlying demand in the $31.5 trillion U.S. economy.
Also, gross private domestic investment rose 3.8% after being flat in Q3.

The real question here is this: How will it affect the midterms?

The Latest Job Reports Is Good News for the Trump Administration's Affordability Messaging

As the famous saying goes, in elections, "It's the economy, stupid." That's as accurate this year as it has ever been. Here's the thing: Most people don't pay attention to GDP reports. They do notice inflation, because it hits them directly in the pocketbook. They notice that gasoline prices have been down since January 2025, and that's important because fuel prices, not just gasoline but diesel, affect the price of everything else. Regular folks notice grocery prices, including staples like eggs and milk, which have been down since January 2025. They notice these things that affect them directly, and probably a majority of people in the United States neither know nor care about quarterly GDP reports.

That has to be the focus for the midterm elections. Yes, tout the good GDP numbers when they come out - and we still have at least two more quarters of data before the election. But keep the focus on those pocketbook issues, because, yes, it's the economy, stupid, and those are the economic indicators that affect people the most.

Editor’s Note: The 2026 Midterms will determine the fate of President Trump’s America First agenda. Republicans must maintain control of both chambers of Congress.

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