Lead
The U.S. Bureau of Economic Analysis (BEA) reported in its second estimate that real gross domestic product (GDP) rose at an annual rate of 0.7 percent in the fourth quarter of 2025 (October–December). That follows a 4.4 percent increase in the third quarter. The release, originally set for February 26, 2026, was delayed because of the October–November 2025 federal government shutdown. BEA attributes the quarter’s modest gain mainly to stronger consumer spending and investment, partly offset by weaker government spending and exports.
Key Takeaways
- Real GDP increased 0.7% (SAAR) in 2025 Q4; this is a downward revision of 0.7 percentage point from BEA’s advance estimate.
- Quarter-to-quarter deceleration from Q3’s 4.4% growth reflected lower government spending, weaker exports, and slower consumer spending, offset by faster investment.
- BEA estimates the federal shutdown subtracted about 1.0 percentage point from Q4 real GDP growth.
- Real final sales to private domestic purchasers rose 1.9% in Q4, revised down 0.5 percentage point from the prior estimate.
- Price gauges: the gross domestic purchases price index rose 3.8% in Q4 (up 0.1 point from the advance); the PCE price index rose 2.9%, and PCE excluding food and energy rose 2.7% (both unchanged from the advance).
- For the full year 2025, real GDP increased 2.1%, revised down 0.1 percentage point from the previous annual estimate.
- BEA revised down exports, consumer services (notably healthcare), government structures investment, and certain IP-related investment as principal sources of the downward GDP revision.
Background
The BEA issues three successive GDP estimates: advance, second, and third. The second estimate incorporates additional source data released after the advance and often changes the growth rate by several tenths of a percentage point. For Q4 2025, BEA had less-than-complete source information because the October–November 2025 federal shutdown disrupted data collection and reporting for some agencies.
In 2025 the U.S. economy faced a mix of persistent consumer demand, elevated investment in intellectual property and equipment earlier in the year, and tightening external conditions that restrained exports. State and local government spending and construction trends have been variable, and the Census Bureau’s revised construction data were an important input into BEA’s Q4 estimate.
Main Event
BEA’s second estimate found consumer spending and private investment were the principal contributors to Q4 growth. Consumer outlays—goods and services combined—continued to support activity, though BEA revised services downward in the quarter, with healthcare services identified as a notable drag based on new Quarterly Services Survey data.
Investment contributed through accelerated spending on equipment and other private fixed investment compared with the previous quarter, but BEA reduced its estimate for structures and intellectual property products (notably software) after incorporating updated Census source data for construction and services.
Government spending fell in Q4 and was a clear drag on growth; BEA attributes a meaningful portion of that decline to reduced federal labor services during the shutdown period. Exports were revised down—particularly services exports tied to intellectual property charges—while imports fell, which mechanically boosts measured GDP but BEA found the drop in imports smaller than previously estimated.
The second estimate also adjusted price measures: the gross domestic purchases price index was revised up to a 3.8% increase for Q4, while the PCE price index and its core counterpart remained at 2.9% and 2.7%, respectively. Those price paths feed into real-versus-nominal reconciliations and affect real GDP calculations.
Analysis & Implications
The downward revision of 0.7 percentage point from the advance estimate signals that headline quarterly growth was weaker than initial data suggested. Much of the revision stems from updated source information for exports, services consumption (healthcare), state and local construction, and certain types of investment—areas where late-arriving Census and survey data matter most.
BEA’s estimate that the federal shutdown removed about 1.0 percentage point from Q4 real GDP highlights how short-term disruptions to federal services and data collection can meaningfully affect measured growth. The estimate is BEA’s attempt to quantify a difficult-to-isolate effect embedded in the source data rather than a direct, separately observed loss of output.
For policymakers, a quarter with downward revisions concentrated in government spending and exports is less likely to imply a broad-based private-sector slowdown than a similar-sized decline driven primarily by household consumption and investment. The 1.9% rise in real final sales to private domestic purchasers—though revised down—suggests private domestic demand remained positive, even as headline GDP softened.
Looking ahead, further revisions are possible with the scheduled third estimate on April 9, 2026, when BEA will incorporate additional source data. Markets and policymakers should treat the second estimate as a more informed snapshot than the advance estimate but still subject to refinement.
Comparison & Data
| Measure | Advance estimate (%) | Second estimate (%) |
|---|---|---|
| Real GDP (Q3→Q4, SAAR) | 1.4 | 0.7 |
| Current-dollar GDP | 5.1 | 4.5 |
| Real final sales to private domestic purchasers | 2.4 | 1.9 |
| Gross domestic purchases price index | 3.7 | 3.8 |
| PCE price index | 2.9 | 2.9 |
| PCE index excluding food and energy | 2.7 | 2.7 |
The table above summarizes BEA’s advance and second estimates for key Q4 measures. The most notable numerical change is real GDP—revised down from 1.4% to 0.7%—driven by revisions to several demand components and source-data updates from Census and other agencies.
Reactions & Quotes
BEA framed the revision as an adjustment driven by updated source data and the special circumstances of the federal shutdown. Observers in the private sector emphasized the mix of policy-relevant signals and measurement noise in the release.
“The downward revision largely reflects new data showing weaker exports, slower services consumption and softer government and certain investment categories,”
U.S. Bureau of Economic Analysis (BEA) — official release
BEA’s characterization accompanies its estimate that the shutdown reduced Q4 growth by roughly 1.0 percentage point. Private-sector analysts noted that such a mechanical subtraction can mask underlying private demand resilience.
“When a temporary cut in federal services subtracts about a percentage point from growth, it complicates the reading of the private-sector economy, which still shows modest expansion,”
Independent private-sector economist (paraphrased)
Unconfirmed
- The full, separable economic cost of the October–November shutdown to long-term growth remains uncertain and cannot be cleanly identified in BEA’s source data.
- Further downward (or upward) revisions to Q4 estimates are possible when BEA issues the third estimate on April 9, 2026, after receiving additional source data.
- The indirect effects of altered federal procurement or regulatory timing on private investment in Q4 are not fully quantified in this release.
Bottom Line
BEA’s second estimate reduces the headline Q4 2025 growth rate to 0.7% (annualized) and trims the annual 2025 gain to 2.1%, reflecting downward revisions across exports, services consumption, government spending, and some investment categories. A significant, but estimated, portion of the Q4 reduction stems from the October–November federal shutdown—BEA places that effect at about −1.0 percentage point for the quarter.
For users of the data—policymakers, market participants, and analysts—the second estimate is a clearer indicator than the advance but is not final. The composition of the revision suggests private domestic demand retained positive momentum, while government and external sectors weighed on headline growth. The next BEA update on April 9, 2026, should further narrow uncertainties as more source data are incorporated.
Sources
- U.S. Bureau of Economic Analysis — GDP (Second Estimate), 4th Quarter and Year 2025 (official BEA release)
- U.S. Bureau of Labor Statistics — Consumer Price Index (CPI) information (official BLS data and statements on CPI collection)
- U.S. Census Bureau — Value of Construction Put in Place (VPIP) (official Census construction data)