The U.S. economy grew at an annual rate of 0.5% in Q4 2025, a slowdown from the prior estimate of 0.7%, partly reflecting the drag from a 43-day government shutdown last fall.

A core GDP component measuring underlying momentum expanded 1.8% in Q4, down from 2.9% in Q3, indicating softer momentum when volatile items are excluded.

The 2026 outlook is uncertain amid higher energy costs and global disruption linked to the U.S.-Israel war with Iran, which risk fueling inflation and impacting trade.

Forecasters warn that the year ahead may hinge on how energy costs and global trade respond to ongoing geopolitical risk.

Be mindful that GDP and related measures are not perfect signals in isolation, with external headwinds like geopolitical tensions complicating interpretation.

Consumer spending rose 1.9% in Q4, with goods spending up only 0.3%, signaling softer household demand even as the annual pace remained modest.

The weaker GDP reading could constrain the Fed, potentially shaping decisions on rates and possible stimulus to support activity.

Overall, the economy faces a hazy path in 2026 due to energy price pressures and geopolitical tensions affecting supply and demand.

The outlook underscores continued vigilance: consumption, investment, and trade in the coming quarters will determine whether growth stalls into a recession or stabilizes.

Market watchers will focus on upcoming indicators and potential policy responses that could alter growth trajectories.

Note: this story was generated with AI assistance and reviewed by an editor.

Despite pockets of resilience in some indicators, the Q4 slowdown raises questions about the durability of growth amid tighter financial conditions and policy uncertainty.