The U.S. economy grew at just 0.7% in Q4 2025. That headline is alarming — and partly misleading.
The 43-day federal government shutdown last autumn subtracted roughly one full percentage point from that figure on its own.
Without the shutdown’s drag, the underlying economy was probably growing closer to 1.7%. Still slow, but a meaningfully different picture.
The Bureau of Economic Analysis confirmed the revised figure on Friday, cutting the prior 1.4% estimate in half.
Full-year 2025 GDP came in at 2.1%. That is down from 2.8% in 2024 and the weakest annual rate since 2020.
Consumer spending growth was revised down to 2.0% for Q4. The prior estimate had it at 2.4%.
Healthcare services spending drove much of the downward revision, based on new Census Bureau data that arrived after the initial estimate.
Government spending and exports both declined. Imports fell by less than expected, which also mathematically weighed on the headline.
“The big downward revision in GDP is a gut check going into this energy crunch, increasing the risk of stagflation,” said David Russell of TradeStation.
Now the Iran conflict is stacking fresh pressure on an already fragile foundation. Oil near $100 means inflation will get worse before the Fed can act.
The Fed cannot cut rates while core PCE runs at 3.1%. It cannot raise them with GDP this weak.
A final Q4 revision arrives April 9. The shutdown effect will still be in the numbers — but it won’t be the story anymore.