US GDP Report (Q4 2025): Growth Slows to 1.4%

Source: U.S. Bureau of Economic Analysis, GDP Advance Estimate (February 20, 2026).

Real GDP increased at a 1.4% annual rate in the fourth quarter of 2025, according to the advance estimate released by the U.S. Bureau of Economic Analysis. This marks a sharp slowdown from the 4.4% pace recorded in Q3.

For full-year 2025, real GDP increased 2.2%, compared with 2.8% growth in 2024.

What Drove Q4 Growth

According to the BEA, increases in consumer spending and investment contributed to the rise in real GDP during Q4. These gains were partially offset by decreases in government spending and exports.

The composition of growth is significant. Consumer demand remains a primary driver of economic expansion, while weaker exports and government spending contributed to the deceleration compared to Q3.

Direction Matters More Than Level

Markets often focus on the direction and momentum of GDP rather than whether growth is positive.

A slowdown from 4.4% to 1.4% suggests cooling momentum into year-end. However, continued expansion supported by consumer spending indicates that broad contraction has not taken hold.

Market Implications

For equities, slower growth can pressure cyclical sectors if investors interpret the deceleration as a broader slowdown. However, stable consumer spending can help support a soft-landing narrative.

For bond markets, cooler GDP growth may reduce pressure for restrictive policy, particularly if inflation data continue to moderate.

For policymakers, Q4 GDP suggests moderation rather than contraction.

Bottom Line

The U.S. economy expanded at a 1.4% annual rate in Q4 2025, down from 4.4% in Q3. Full-year growth slowed to 2.2% in 2025.

The data point to cooling momentum, but continued expansion driven by consumer demand rather than outright economic contraction.