US economic growth sharply lower than estimated in fourth quarter
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For the full year of 2025, US gross domestic product growth was 2.1 per cent, just a touch below the 2.2 per cent previously estimated.
PHOTO: BLOOMBERG
- US GDP growth for Q4 2025 was revised down to 0.7% from 1.4%, reflecting lower exports, consumer spending and government investment.
- The slower growth and rising energy prices due to Middle East conflict pose challenges for the Federal Reserve's inflation target of 2%.
- Full year 2025 GDP growth was 2.1%. Job losses and inflation put the Fed in a "tough spot", balancing employment and prices. (AFP)
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WASHINGTON – The US economy grew at a significantly slower pace than initially estimated for the final months of 2025, government data showed on March 13, a major downgrade that comes as fallout from war in the Middle East looms.
US gross domestic product (GDP) rose at an annual rate of 0.7 per cent in the fourth quarter, the Commerce Department said.
This was sharply down from its earlier estimated 1.4 per cent over the October to December period.
It also indicated that the world’s biggest economy was on a weaker footing than anticipated ahead of the US-Israeli strike targeting Iran on Feb 28 that has since plunged the crude-rich region into war.
Already, the conflict has roiled energy markets and sent fuel prices surging, fanning worries about inflation.
In the fourth quarter, the growth adjustment reflected “downward revisions to exports, consumer spending, government spending and investment”, the Commerce Department said.
Imports decreased less than initially calculated, it added.
The tepid showing caps the first full year of President Donald Trump’s return to the White House and comes as worries over a cooling job market and stubborn inflation are also growing.
A separate report showed on March 13 that the Federal Reserve’s preferred inflation gauge came in slightly lower than expected in January.
But the 2.8 per cent level is still notably above the central bank’s longer-term target of 2 per cent.
For the full year of 2025, GDP growth was 2.1 per cent, just a touch below the 2.2 per cent previously estimated.
Mr Trump was quick to blame a lengthy government shutdown in late 2025 for the slowdown in growth when early estimates were released in February.
In the third quarter, US GDP rose by a much higher 4.4 per cent, the Commerce Department said.
While the Republican leader has repeatedly called for lower interest rates to boost the economy, the Fed’s job has been complicated by persistent inflation and now, further price pressures as energy costs spike.
The independent central bank, which has a dual mandate of maintaining stable prices and low unemployment, would typically be inclined to cut rates to shore up employment.
But it also uses higher interest rates as a means to rein in inflation.
The energy shock comes as the US labour market appears to be in a difficult spot, shedding 92,000 jobs in February while unemployment crept up. All of this puts the Fed in a tough spot.
Economists have said that solid consumption and an artificial intelligence boom had kept the economy growing in 2025.
But households, already struggling with high costs of living, are set to come under further strain with the jump in energy costs, which could push consumers to pull back on spending. AFP
