US GDP Growth Sharply Slows To 1.4% In Q4, Fed's Favorite Inflation Rate Unexpectedly Rises

U.S. gross domestic product grew at an annualized rate of 1.4% in the fourth quarter of 2025, according to advance estimates released Friday by the Bureau of Economic Analysis.

The figure marks a sharp slowdown from the prior quarter's 4.4% expansion pace and came in sharply below economists' expectations for 3% growth.

In a separate release, the Personal Consumption Expenditures (PCE) price index inched up from 2.8% year-over-year in November to 2.9% in December, surpassing forecasts of an unchanged reading.

On a monthly basis, headline PCE climbed 0.4% in December, the fastest pace since February and above the 0.3% forecast. It followed a 0.2% gain in November.

Excluding food and energy, core PCE ? the Federal Reserve's preferred inflation gauge ? advanced to 3% from 2.8%, topping expectations for an acceleration to 2.9%.

On a monthly basis, core PCE increased 0.4%, topping expectations for 0.3% and marking the strongest gain since February.

The data reinforces recent warnings from policymakers that the disinflation process may be progressing more slowly than anticipated.

What Drove The GDP Slowdown?

The deceleration reflected downturns in government spending and exports and a slowdown in consumer spending. An acceleration in investment partly offset those drags. Imports declined at a slower pace than in the third quarter.

Real final sales to private domestic purchasers, which combine consumer spending and gross private fixed investment, rose 2.4% in the fourth quarter.

That compares with a 2.9% increase in the third quarter, signaling softer domestic demand.

The price index for gross domestic purchases climbed 3.7% in the fourth quarter, up from 3.4% in the prior period. The headline Personal Consumption Expenditures price index rose 2.9%, compared with 2.8% in the third quarter.

For full-year 2025, real GDP increased 2.2% from the 2024 annual level. That marked a slowdown from 2.8% growth in 2024.

The price index for gross domestic purchases rose 2.6% in 2025, compared with 2.4% in 2024. The PCE price index increased 2.6% for the year, unchanged from 2024.

Core PCE rose 2.8% in 2025, slightly below the 2.9% increase recorded in the prior year.

Markets Turn Risk-Off, Precious Metals Rally

The combination of 1.4% growth and 3% core inflation leaves policymakers facing a tougher path in early 2026, as slowing activity collides with stubborn price pressures.

Futures tied to major U.S. benchmarks fell after the data. Contracts tracking the S&P 500 were down 0.3%, while Dow futures also slipped 0.3%. Nasdaq 100 futures dropped 0.5%, reflecting pressure on growth and technology shares.

Nvidia Corp. (NVDA) and Meta Platforms Inc. (META) traded lower in premarket action, extending weakness in AI-linked stocks.

Safe-haven demand strengthened. Gold rallied 1% to $5,100 per ounce, while silver surged more than 4% to trade above $80.