US Growth Slows to 0.5% in Q4 as Incomes Fall but Spending Holds
Cover image from newrepublic.com, which was analyzed for this article
Q4 GDP revised to sluggish 0.5%, personal income dipped 0.1% or $18.2B in February amid 3% inflation, but consumer spending rose solidly. Signals pre-war softening with labor steady. Philly Fed data awaited for more employment insights.
PoliticalOS
Thursday, April 9, 2026 — Business
The U.S. economy decelerated in late 2025 with GDP at 0.5 percent in Q4 and a modest February income drop, yet consumer spending rose solidly at 0.5 percent even as core inflation held at 3 percent. These mixed signals arrived amid a bipartisan shutdown and just before a fragile Iran ceasefire, showing resilience in household demand and wages but raising questions about sustainability if external shocks intensify. Readers should focus on the full BEA dataset and upcoming labor indicators rather than single metrics or political blame.
What outlets missed
Most coverage omitted that the 43-day government shutdown was a bipartisan congressional failure over spending bills rather than unilateral executive action, with both parties trading blame. Outlets also underplayed that wages and salaries continued rising in February even as overall income fell, and that real consumer spending posted a respectable 2.8 percent year-over-year gain. The absence of any NBER-defined recession, despite positive but slowing GDP, received little emphasis, as did the fact that the Iran conflict context involved a fragile two-week ceasefire with ongoing Lebanon disputes rather than sustained U.S. combat operations. Finally, few noted the upcoming Philadelphia Fed survey as a key upcoming indicator for employment trends in the manufacturing sector, which could clarify whether labor markets are truly steady or beginning to soften.
American households face thinner paychecks and prices that refuse to ease. Yet they continue spending at a solid pace. That tension runs through the latest economic reports: slowing growth, a dip in incomes, resilient consumers, all arriving just before heightened tensions with Iran.
The Bureau of Economic Analysis revised fourth-quarter 2025 GDP growth to an annual rate of 0.5 percent, down from its prior estimate of 0.7 percent and well below the third quarter's 4.4 percent surge. For the full year 2025 the economy expanded 2.1 percent, according to the agency, compared with 2.8 percent in 2024. A 43-day government shutdown spanning October and November, triggered by a congressional impasse over spending legislation that included Affordable Care Act subsidies, cut federal spending and investment by an estimated 16.6 percent and subtracted 1.16 percentage points from Q4 growth, per secondary analyses citing BEA figures. The latest revision also reflected weaker private inventory investment, especially in wholesale trade, based on updated Census Bureau data. Gains in information services, healthcare and wholesale trade partially offset declines in federal government activity and nondurable goods manufacturing. Thirty-five states saw GDP rise, led by North Dakota at 3.8 percent; the District of Columbia fell 8.3 percent.