US economic growth
WASHINGTON: U.S. economic growth slowed in the final three months of last year, dragged down by the six-week shutdown of the federal government and a pullback in consumer spending.
The nation’s gross domestic product — the total output of goods and services — increased at a 1.4% annual rate in the fourth quarter, the Commerce Department reported Friday, down from 4.4% in the July-September quarter and 3.8% in the quarter before that.
The figures point to what could be a more modest pace of growth in the coming quarters, as consumers have taken on more debt and saved less to maintain their spending, a process that may be difficult to sustain. Business investment, other than data centers and equipment dedicated to artificial intelligence, grew at only a moderate pace.
Still, a measure of underlying growth that focuses on consumer and business spending was mostly healthy at 2.4%, economists said. The sharp slowdown in government outlays because of the shutdown shaved a full percentage point from growth.
Consumers and companies spent at a “reasonably solid” pace, said Martha Gimbel, executive director of the Budget Lab at Yale and former economist in the Biden White House. “This is not a disastrous report.”
Also Friday, the Supreme Court struck down many of President Donald Trump’s tariffs, which have lifted inflation slightly and likely discouraged many companies from hiring by raising their costs.
At a news conference, Trump quickly promised to reimpose the tariffs under different laws than the one the court invalidated.
Consumer spending also rose 2.4% in the fourth quarter, a solid increase but notably below the third quarter’s healthy 3.5% gain. Federal government outlays plunged nearly 17% amid the shutdown. That decline should mostly reverse in the coming quarters, however.
