GDP Report Live: Growth Slows but Core Economy Shows Resilience

Welcome to SmartHabesha’s live coverage of the fourth-quarter Gross Domestic Product report. Here, we bring you the latest economic growth data, explain its implications, and provide in-depth analysis for investors and businesses tracking the Fed’s policy outlook.

GDP expanded at an annualized rate of 1.4% in the fourth quarter, a sharp slowdown from the 4.4% pace in the third quarter. The weaker-than-expected growth reflects the lingering impact of the government shutdown, which disrupted activity and delayed reporting.

The report, originally scheduled for Jan. 29, was released Friday at 8:30 a.m. ET following shutdown-related delays. Despite the headline slowdown, analysts emphasize that the underlying strength of the economy remains intact, supported by resilient consumer spending and steady business investment.

Follow along with our live coverage below as we break down the numbers, highlight sector trends, and analyze what this means for the Federal Reserve’s monetary policy decisions heading into 2026.

Today’s GDP report does not signal long-term concern for economic growth, according to economists and analysts. Much of the fourth-quarter slowdown was tied to the government shutdown, meaning the rapid deceleration is unlikely to persist into the year ahead.

Looking forward, 2026 could see a modest boost from tax refunds that will give consumers more spending power early in the year. BMO Capital Markets projects GDP growth to reach 2.5% by year-end, suggesting a rebound from the temporary weakness seen in late 2025.

Still, risks remain. Tariff policies, immigration challenges, and broader political uncertainties could weigh on growth. Analysts also highlight the unpredictable trajectory of the AI boom, which could either accelerate productivity or face regulatory and adoption hurdles.

Overall, the outlook points to resilience in the U.S. economy, with consumer spending and investment expected to stabilize growth. Yet, the balance between policy risks and emerging opportunities will determine whether GDP momentum strengthens or stalls in 2026.

Scott Hoyt of Moody’s Analytics emphasized that GDP continues to highlight the economy’s strength, with growth over the last three quarters running at or above potential. Still, he cautioned that fragility remains, particularly evident in the job market.

Michael Pearce of Oxford Economics noted that the prolonged government shutdown and the expiry of the EV tax credit weighed on Q4 GDP, but the core of the economy remains resilient. He expects fading tariff pressures and tax cuts to fuel capital spending, helping momentum build in 2026.

Sal Guatieri of BMO Capital Markets pointed out that the U.S. economy is neither as weak as the Q4 headline figure suggests nor as strong as the Q3 surge implied. His view reflects the volatility in recent data and the need to look beyond quarterly swings.

Richard de Chazal of William Blair highlighted that the shutdown’s negative impact was clear, but a rebound should follow in Q1. From the Fed’s perspective, he expects policymakers to look past the noise and see little reason for further rate cuts. Kathy Bostjancic of Nationwide added that growth should be solid and less volatile in 2026, supported by fiscal and monetary policy, stronger hiring, and productivity gains.

While the headline fourth-quarter numbers came in lower than expected, the slowdown extended across the full year. GDP grew at a 2.2% pace in 2025, down from 2.8% in 2024, signaling weaker momentum in the broader economy.

The deceleration reflects lingering effects from policy uncertainty and the government shutdown, which disrupted activity late in the year. Analysts note that while growth remains positive, the pace is below the prior year’s performance, underscoring challenges in sustaining stronger expansion.

Despite the weaker annual growth, resilience in consumer spending and business investment prevented a sharper downturn. These factors helped stabilize the economy even as external pressures weighed on headline GDP.

Looking ahead, economists expect tax refunds, fading tariff pressures, and capital spending to provide a modest boost in 2026. However, risks tied to policy shifts and global trade remain, leaving growth forecasts cautious but optimistic.

Futures tied to the Dow Jones Industrial Average slipped 0.1% in Friday trading, with S&P 500 and Nasdaq 100 futures also edging lower. The move reflected investor caution following a series of economic data releases that pointed to both slowing growth and persistent inflation.

The 10-year Treasury yield rose slightly to 4.07%, signaling higher borrowing costs across consumer loans, including mortgages. Rising yields often pressure equity markets as investors reassess risk and return in light of tighter financial conditions.

The GDP report, which fell short of expectations, contributed to the decline in futures. However, it was not the only factor weighing on sentiment. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 2.9% year-over-year in December, exceeding forecasts and reinforcing concerns about sticky inflation.

Core PCE, which excludes volatile food and energy prices, rose to 3% from 2.8% in November, in line with expectations. While not a surprise, the uptick underscores the challenge facing the Federal Reserve as it works to bring inflation back to its 2% target, keeping markets sensitive to policy signals.

According to the Bureau of Economic Analysis, GDP growth slowed sharply in the final three months of 2025 compared to the prior quarter. The deceleration was largely attributed to downturns in government spending and exports, with economists pointing to the October November government shutdown as a key factor behind the weaker performance.

Consumer spending, the main engine of the U.S. economy, also lost momentum but remained strong overall. Scott Hoyt of Moody’s Analytics noted that consumer activity added 1.6 percentage points to growth, down from 2.3 points in the previous quarter. This moderation highlights the impact of tighter household budgets amid inflationary pressures.

The slowdown in consumer spending was partly offset by an acceleration in investment. Companies raced to expand AI infrastructure, boosting capital expenditures and helping cushion the drag from weaker government activity and trade. This surge in investment reflects the growing role of technology in sustaining economic momentum.

Overall, the GDP report underscores how temporary disruptions like the shutdown weighed on growth, while resilient consumer demand and rising AI-driven investment prevented a deeper contraction. The balance between policy risks and innovation will shape the trajectory of economic performance heading into 2026.

Inflation-adjusted gross domestic product expanded at an annualized rate of just 1.4% in the fourth quarter, a steep drop from the 4.4% pace recorded in the third quarter. The weaker reading highlights a significant loss of momentum in the U.S. economy heading into 2026.

Economists had expected GDP to grow at a 2.4% rate, making the actual figure well below forecasts. The miss reflects the lingering impact of the government shutdown and softer consumer spending, both of which weighed on overall activity.

Friday’s figures represent an advance estimate from the Bureau of Economic Analysis. These numbers will be revised twice as additional data becomes available, with final results scheduled for release in April. The revisions could adjust the headline growth rate, but the initial report already signals a slowdown.

For policymakers and investors, the weaker-than-expected GDP data underscores the challenge of balancing sticky inflation with slowing growth. The Federal Reserve’s cautious stance on interest rates will remain critical as markets assess whether the economy can regain momentum in 2026.

Friday’s GDP report confirmed that the longest-ever government shutdown had a measurable impact on economic growth. President Donald Trump argued that the “Democrat Shutdown cost the U.S.A. at least two points in GDP,” while economists pointed to the 43-day shutdown in October and November as a key drag on activity.

Deutsche Bank researchers estimated that without the shutdown, the economy would have grown 70 basis points more in the fourth quarter. The disruption slowed government spending and exports, contributing to weaker headline growth.

Still, analysts stressed that the shutdown was not the only factor holding back the economy. Aditya Bhave of Bank of America Securities noted that the U.S. had to weather both the shutdown and a wave of trade policy uncertainty, making the reported growth level “no small feat.”

The report underscores how political disruptions and policy risks can weigh on GDP, even as underlying consumer demand and investment remain resilient. Looking ahead, fading tariff pressures and stronger capital spending could help offset these temporary drags in 2026.

The U.S. economy may be expanding at a solid pace, but many Americans aren’t feeling the benefits. Economists remain broadly optimistic about growth, yet consumer sentiment fell to its lowest level since 2014 in January, according to The Conference Board survey.

The disconnect stems from uneven financial realities. High-income households account for most of the spending that fuels GDP, while lower- and middle-income families continue to struggle with rising costs and stagnant wages. This imbalance leaves many consumers feeling left behind despite headline growth.

Adding to the misalignment, the job boom that typically accompanies strong economic expansion has been notably absent. Hiring momentum has slowed, raising concerns about whether growth is translating into broad-based prosperity.

The divergence between economic data and personal finances highlights a critical challenge for policymakers: ensuring that growth is inclusive and felt across income levels. Without stronger wage gains and job creation, optimism among economists may continue to clash with public frustration.

President Donald Trump has predicted that the U.S. economy could achieve a 15% growth rate, a level rarely seen outside wartime. In an interview with FOX Business, he said, “We should be at 15%. We can grow at 15%. I think more than that.”

Economists note that Trump did not specify the exact metric or timeframe for his prediction. Typically, economic growth is measured as the inflation-adjusted annual rate of Gross Domestic Product (GDP). By that standard, achieving 15% growth would be unprecedented under normal conditions.

Historically, real GDP growth averages between 2% and 3% per year. Double-digit growth has only occurred in extreme circumstances, such as recovery from major economic disasters or wartime mobilization. Analysts argue that hitting Trump’s target would require extraordinary and likely disruptive events.

The statement underscores the gap between political rhetoric and economic reality. While the U.S. economy has shown resilience, experts caution that sustainable growth remains far below the levels Trump envisions.

The U.S. economy grew much faster than expected in the third quarter, driven by strong consumer spending and a sharp decline in imports. Inflation-adjusted GDP expanded at an annual rate of 4.4%, up from 3.8% in the second quarter.

This performance blew past forecasts of 3.2% growth and was well above the 2.6% average annual pace recorded over the previous four years. The surge highlights the resilience of household demand and the impact of trade dynamics, which temporarily boosted headline growth.

Economists noted that while the third-quarter strength was impressive, it also set a high bar for subsequent quarters. The slowdown in Q4 underscores how temporary factors like the government shutdown and weaker exports weighed on momentum after the strong summer rebound.

Ahead of Friday’s release, economists projected that inflation-adjusted GDP grew at an annualized rate of 2.5% in the fourth quarter, down from 4.4% in Q3. The forecast, based on surveys by Dow Jones Newswires and The Wall Street Journal, suggests the economy is expanding at a healthy pace despite recent disruptions.

Much of the resilience comes from massive investments in data centers fueling the AI arms race. Analysts believe this AI-driven bump is helping offset the drag from the record-long government shutdown, though not enough to spark a major boom.

Wells Fargo economists reinforced this view, writing that real GDP growth remains on a “solidly positive trajectory,” supported by sturdy consumer spending and stronger business investment. The outlook points to steady, if slower, growth as the economy balances policy risks with innovation-driven momentum.

Gross Domestic Product (GDP) is often used as the headline measure of a country’s economic health. It captures the combined value of consumer spending, government expenditures, net exports, and total investments.

While GDP is a powerful indicator of overall activity, it is backward-looking reflecting what has already happened rather than predicting what comes next. For this reason, financial markets usually react modestly to GDP releases unless the numbers diverge sharply from expectations.

When GDP data comes in stronger or weaker than forecast, it can shift investor sentiment, influence bond yields, and alter expectations for Federal Reserve policy. For example, a weaker-than-expected GDP print may raise concerns about slowing growth, while a stronger report could reinforce confidence in economic resilience.

Ultimately, GDP provides a snapshot of the economy’s performance, but analysts pair it with forward-looking indicators like consumer sentiment, inflation trends, and labor market data to get a fuller picture of where growth is headed.

Here’s a concise synthesis of the GDP report coverage and the Supreme Court tariff rulings you’re following:

GDP Report Takeaways (Investopedia Live Coverage)

• Q4 GDP slowed to 1.4%, down sharply from 4.4% in Q3 and below forecasts of 2.4%.
• The government shutdown and weaker exports were the main drags, though consumer spending still contributed positively.
• Economists expect a rebound in 2026, with tax refunds and capital spending (especially AI infrastructure) helping growth.
• Sentiment remains fragile: households feel squeezed despite headline growth, and the job boom hasn’t materialized.
• Fed officials are likely to look past shutdown noise, keeping rates steady while monitoring inflation.

Supreme Court Tariff Rulings

• The Court struck down most of Trump’s tariffs, ruling he exceeded authority under emergency powers.
• This opens the door to refunds potentially exceeding $175B, though the process will be complex and uneven.
• Markets reacted positively: stocks rose after the ruling, especially in tariff-exposed sectors like footwear, furniture, and e-commerce.
• Inflation data released the same day showed PCE at 2.9%, hotter than expected, keeping Fed policy cautious.

The Big Picture

• Growth slowed, but economists see resilience and expect stabilization in 2026.
• Policy uncertainty is easing: tariffs struck down, fiscal support expected, and AI investment accelerating.
• Markets are mixed: equities rallied on tariff relief, but sticky inflation and weak GDP keep investors cautious.