GDP drops in 4th quarter as Trump admin pulls back on spending amid gov shutdowns

The economy slowed to a 1.4 percent GDP growth rate in the fourth quarter of 2025, after having more robust growth in Q2 and Q3 of the year, as there has been a pullback in federal spending. The slowdown in the final quarter of the year was primarily due to a large drop in government spending in the economy, which contributes to GDP numbers.

"The contributors to the increase in real GDP in the fourth quarter were increases in consumer spending and investment. These movements were partly offset by decreases in government spending and exports. Imports, which are a subtraction in the calculation of GDP, decreased," a press release from the Bureau of Economic Analysis said. The Dow Jones had expected a gain of 2.5 percent overall.

There was a slight slowdown in consumer spending, where the third quarter of 2025 saw an increase in spending at 2.9 percent, but a 2.4 percent increase in spending was seen in Q4. The slowdown in government spending accompanied the weeks-long shutdown in the latter portion of 2025, which likely decreased the amount of funding being spent by the government. In October, the Congressional Budget Office said, "Depending on its length, the government shutdown will reduce annualized real GDP growth in that quarter by 1.0 to 2.0 percentage points."

“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," Chris Rupkey, chief economist at Fwdbonds, said, per CNBC.

Although the overall GDP dropped, the real final sales to private domestic purchasers rose by 2.4 percent, which points to consistent demand in the economy. Personal income rose by 0.3 percent in December.

40 minutes before the GDP report was released, President Donald Trump wrote on Truth Social, "The Democrat Shutdown cost the U.S.A. at least two points in GDP. That’s why they are doing it, in mini form, again. No Shutdowns! Also, LOWER INTEREST RATES. 'Two Late' Powell is the WORST!!! President DJT."