The latest GDP data isn’t as bad as it looks. Here’s what to know.

The economy in 2025 was off to a strong start but hit a roadblock in the fourth quarter due to a government shutdown and a slowdown in consumer spending. The Commerce Department reported that the Gross Domestic Product (GDP) only grew at a meager 1.4% annual rate in the final quarter, falling short of economists’ expectations of 2% growth. This was a significant drop from the previous quarter when the economy expanded at a rapid pace of 4.4%.

While the GDP number was disappointing, analysts believe that the economy is still on solid footing and is expected to pick up momentum in the coming months. Despite the setback in the fourth quarter, experts remain optimistic about the overall outlook for the economy.

The government shutdown played a significant role in the economic slump at the end of 2025. Lasting for 43 days, the shutdown resulted in the furlough of hundreds of thousands of federal workers and brought federal funding to a halt for various programs. The Commerce Department’s report indicated that the shutdown reduced fourth-quarter growth by approximately 1 percentage point, primarily due to a decrease in federal government services.

In addition to the government shutdown, a slowdown in consumer spending also contributed to the economic downturn in the fourth quarter. Consumer spending, which accounts for a significant portion of economic activity, only rose by 2.4% compared to 2.9% in the previous quarter. While spending did not plummet, the deceleration in growth was noticeable.

Despite the challenges faced in the fourth quarter, there are positive signs for the economy moving forward. Job growth exceeded expectations in the latest report, with employers adding 130,000 positions. Inflation is also showing signs of cooling down. Analysts anticipate a rebound in economic growth this year, with forecasts suggesting a 3% annual rate in the first quarter of 2026.

Factors such as softening tariff pressures and ongoing tax cuts are expected to boost consumer spending and drive economic growth. With the government shutdown in the past, experts believe that the economy will bounce back in the coming months.

Overall, while the fourth-quarter GDP numbers were lower than anticipated, there is optimism for a recovery in the near future. The economy is expected to regain momentum, supported by various positive indicators and policy measures.