Government Shutdown and Fiscal Policy

U.S. GDP slowed to an annualized 1.4% in Q4 2025, leaving full‑year growth at about 2.2% after a 43‑day federal government shutdown that shaved roughly one percentage point off quarterly growth and sent federal outlays down nearly 17%. Consumer spending decelerated to about 2.4% as households borrowed more and saved less, business investment was moderate outside AI‑related data‑center and equipment spending, trade added little, and the expansion came with fewer than 200,000 net jobs for the year while December PCE inflation stayed “sticky” at 2.9%, though analysts expect a rebound in early 2026.