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Updated on Feb. 20.
Real gross domestic product grew by an annual rate of 1.4% in the fourth quarter of 2025, according to the initial estimate report released on Feb. 20 by the Bureau of Economic Analysis.
GDP was negative in the first quarter of the year, rebounded to 3.8% in the second quarter and rose by 4.4% in the third quarter.
Growth in the fourth quarter was largely due to an increase in consumer spending and investment. Meanwhile, government spending and exports went down. Imports also declined — that figure is subtracted in the GDP calculation.
Here’s what NerdWallet’s senior economist Elizabeth Renter had to say about Q4 GDP:
In the last quarter of the year, consumer spending on services pulled well more than its weight in keeping the economy growing. Without resilient American households spending amidst economic uncertainty and a record long government shutdown, the fourth quarter GDP figures would have been quite disappointing. We know this spending is largely being driven by high-earning and asset-holding households, however, and there is discomfort beneath the headline figures.
» MORE: Are we in a recession?
What is GDP?
GDP, or gross domestic product, is the market value — in current dollars — of all goods and services produced within the United States in a given period; Real GDP adjusts that measure for inflation. Changes in GDP are expressed on an annualized basis.
Does recent GDP data signal there is trouble ahead?
The 2025 fourth quarter growth increased at 1.4% — a slower pace than both third quarter growth (4.3%) and second quarter growth (3.8%). In the first quarter of 2025, growth was negative.
Negative growth, or contraction, is generally a red flag that there is a slowdown happening in the economy. It shows that consumers and businesses may be spending less. Two consecutive quarters without growth is the traditional definition of a recession.
The first quarter 2025 drop in GDP was largely due to a surge in imported goods as companies and consumers tried to get ahead of President Donald Trump’s tariffs. That said, imports aren’t produced in the U.S. so they aren’t counted in the same way as other GDP factors like household spending, exports and investments. It’s likely that the negative GDP in March reflected a technicality rather than a sign of distress in the economy.
Fed projects 1.7% growth for 2025, lower than previous forecast
Recent GDP projections by the FOMC forecasts lower growth for 2025 (1.7%) compared to its December forecast (2.1%), according to the FOMC’s Summary of Economic Projections released after its meeting March18-19
In terms of how the Fed might respond to changes in growth, Federal Reserve Chair Jerome Powell said at an event on April 4, “Inflation is going to be moving up and growth is going to be slowing, but to me it's not clear at this time what the appropriate path for monetary policy would be. We're going to need to wait and see how this plays out before we can start to make those adjustments.”
GDP for the fourth quarter of 2025
The BEA’s initial estimate showed that the U.S. GDP grew slower in the fourth quarter of 2025 than it did in the second and third quarters.
In the fourth quarter — covering October, November and December — real GDP went up by 1.4%, the initial estimate shows.
Here’s how the economy grew in recent quarters:
- 4.4% annual rate of growth in Q3 2025.
- 3.8% annual rate of growth in Q2 2025.
- -0.5% annual rate of growth in Q1 2025
- 2.4% annual rate of growth in Q4 2024.
- 3.1% annual rate of growth in Q3 2024.
- 3% annual rate of growth in Q2 2024.
- 1.6% annual rate of growth in Q1 2024.
- 3.4% annual rate of growth in Q4 2023.
- 4.9% annual rate of growth in Q3 2023.
- 2.1% annual rate of growth in Q2 2023.
- 2.1% annual rate of growth in Q1 2023.
The next estimate will be released on March 13.
How did GDP in 2025 compare to recent years?
In 2020, at the beginning of the COVID-19 pandemic, the annual rate of GDP dropped to levels far below even those during the Great Recession, federal data shows. By the end of 2020 and into 2021, GDP rebounded quickly. However, the first two quarters of 2022 showed signs of slowing down before a more robust finish at the end of the year. GDP continued its upward trajectory through 2023, 2024 and 2025.
In 2025, the U.S. Real GDP grew 2.2%, below the 2.8% increase in 2024 and 2.9% increase in 2023. The 2025 increase reflected a rise in consumer spending and investment.
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What did people spend money on in Q4 2025?
- Within consumer spending, services rose while goods fell. Services spending was led by health care and investment in intellectual property products, private inventory investment and equipment.
- Federal government spending declined, largely due to the government shutdown.
- Exports fell, largely due to a technical change by the BEA — it removed investment silver from exports since only silver is used in industry counts.
Photo by Justin Sullivan/ Getty Images News via Getty Images
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