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Real GDP growth slowed in Q4 of 2025 in the wake of the historic government shutdown’s impact on the economy. While consumer spending continued to drive growth, federal government spending brought overall growth down over a full percentage point, according to an NAHB analysis.
According to the latest report from the Bureau of Labor Statistics, real GDP grew at an annual rate of 1.4% in the fourth quarter of 2025, down from a 4.4% increase in the third quarter. The report also indicates that inflationary pressures intensified over Q4. The price index for gross domestic purchases rose 3.7%, up from the third quarter’s 3.4% increase.
The Personal Consumption Expenditure Price (PCE) Index, measuring inflation across various consumer expenses and changes in consumer behavior, increased 2.9% in the fourth quarter. This is slightly higher than a 2.8% rise in the previous quarter.
Real GDP grew 2.2% in 2025, lower than the 2.8% increase in 2024 and the weakest annual growth rate since the pandemic. The increase was driven by increases in consumer spending and investment, partially offset by decreases in government exports. Consumer spending rose 2.4% annually in the fourth quarter, the slowest pace since Q1 2025.
