Amidst the global tensions and US-Iran-Israel war, US economy grew at a slower pace than expected. According to the latest data released on April 9th, real Gross Domestic Product (GDP) increased at an annual rate of 0.5% in the fourth quarter. This was lower than both the earlier estimate of 0.7% and the market expectation of 0.7%. The new figure shows that economic growth lost momentum
Income-based measures show a slightly better picture. Real Gross Domestic Income (GDI) grew by 2.6% in the fourth quarter, higher than GDP growth. This shows that earnings in the economy may still be relatively healthy even as production slows. Corporate profits also increased strongly, rising by $246.9 billion in the quarter.
Sharp slowdown compared to previous quarter
The fourth-quarter growth of 0.5% marks a big drop from the strong 4.4% growth seen in the third quarter of 2025. This sharp slowdown shows how economic conditions changed within a few months.
Looking at different parts of the economy, services performed better than goods. Private services industries grew by 2.3%, helped by sectors like healthcare, information, and wholesale trade. On the other hand, government activity fell sharply by 7.8%, and goods-producing industries declined by 1.8%.
Growth revised down due to weaker investment
Officials said the main reason for the downgrade was weaker investment. As the US Bureau of Economic Analysis (BEA) explained, “Real GDP was revised down 0.2 percentage point from the second estimate, primarily reflecting a downward revision to investment.” This means businesses likely spent less on things like equipment, buildings, and expansion than earlier thought. Even though the economy grew, the slower pace shows that companies may be becoming more cautious.
Consumer spending supports the economy
Regardless of the slowdown in the economy, consumer spending remained a key strength. BEA said in its press release, “The contributors to the increase in real GDP in the fourth quarter were increases in consumer spending and investment.” This shows that people continued to spend money on goods and services, helping to keep the economy moving.
Government spending and exports both fell during the quarter. The BEA added, “These movements were partly offset by decreases in government spending and exports. Imports, which are a subtraction in the calculation of GDP, decreased.” A fall in imports actually supports GDP calculations, but it can also indicate weaker demand.
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