Economic Growth Was Slower Than Previously Believed In Fourth Quarter

ETHReserveBank · 2026-03-13T15:49:59+00:00

The BEA revised Q4 GDP growth to 0.7%, down from 1.4%, reflecting broad declines in government, consumer spending, and investment due to a record government shutdown, indicating potential stagflation risks.

ETHReserveBank

2026-03-13 15:49:59

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Key Takeaways

The BEA halved its preliminary GDP growth estimate to a 0.7% annual rate.
The downward revision was across the board, with reductions to initial estimates for government spending, consumer spending, investment, and exports.
Economic growth was sluggish that quarter because of a record-long government shutdown.

A preliminary estimate last month showing the economy growing at a solid clip in the fourth quarter may have been too optimistic

The U.S. economy grew at an inflation-adjusted annual rate of 0.7% in the fourth quarter, the Bureau of Economic Analysis said Friday. That was half the bureau’s preliminary estimate of 1.4% annual growth in February, and a significant slowdown from 4.4% annualized growth in Q3.

Forecasters had expected the revision to go the other way, anticipating an increase to 1.5% from the previous estimate, according to a survey of economists at D_ow Jones Newswires_ and The Wall Street Journal.

What This Means For The Economy

Although GDP figures were dragged down by the government shutdown, the economy is closer to “stagflation,” with high inflation and slow growth, than previously believed.

The slowdown partly reflects the record-long government shutdown in October and November, which significantly reduced government spending.

The second estimate is lower because the economy was weaker than previously thought across the board, with downward revisions to exports, consumer spending, government spending, and investment, the BEA said.

Related Education

Understanding GDP: Key to Economic Growth

What Is Stagflation, What Causes It, and Why Is It Bad?

The BEA will release its third and final estimate of fourth-quarter GDP in April.

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