A customer shops at a grocery store on March 11, 2026 in Miami, Florida.
Joe Raedle | fake images
Economic growth was much slower than expected in the final three months of 2025, while core inflation rose after 2026, the Commerce Department reported Friday.
Gross domestic product, a measure of all goods and services produced in the growing U.S. economy, rose at a seasonally and inflation-adjusted annual rate of just 0.7% in the fourth quarter, according to the department’s Bureau of Economic Analysis.
The first revision to the GDP reading was a sharp step down from the previous estimate of 1.4% and well below the Dow Jones consensus forecast of 1.5%. It also marked a considerable slowdown from the 4.4% increase in the previous period.
For the full year, GDP posted an increase of 2.1%, or a tenth of a percentage point less than the previous reading. In 2024, the economy grew at a rate of 2.8%.
According to the BEA, the downward revision was due to adjustments in consumer and government spending and exports. The drop in imports, which technically detract from GDP, was also smaller than the previous estimate.
On the inflation side, January’s readings were mostly in line with estimates, although they showed price increases well above what the Federal Reserve would like.
The personal consumption expenditures price index, the Federal Reserve’s main inflation forecasting tool, posted a seasonally adjusted gain of 0.3% for the month, putting the annual rate at 2.8%. Economists surveyed by Dow Jones expected respective readings of 0.3% and 2.9%.
Excluding volatile food and energy costs, core PCE inflation rose 0.4% in January and 3.1% over the 12 months. Federal Reserve officials are focusing more closely on the central reading as a better indication of long-term trends. The base reading was 0.1 percentage point higher than in December.
Although the figures are dated, they provide a snapshot of inflationary pressures ahead of the Supreme Court’s decision that struck down many of the tariffs that President Donald Trump had exercised under provisions of the International Emergency Economic Powers Act. Economists generally assumed that the tariffs had added about half a percentage point or a little more to inflationary trends.
The report also predates the early March attacks that the United States and Israel launched against Iran. Energy prices have soared in the nearly two weeks since the conflict began, with the international benchmark price of Brent crude hitting $100 a barrel on Thursday.
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