Lana Rhoades
The United States economy demonstrated a modest expansion in the fourth quarter of 2025, with real gross domestic product (GDP) increasing at an annualized rate of 0.5 percent. This figure, representing the third estimate from the U.S. Bureau of Economic Analysis (BEA), marks a significant deceleration from the robust 4.4 percent growth observed in the preceding third quarter. The revised GDP figure reflects a downward adjustment of 0.2 percentage point from the second estimate, primarily attributed to a recalibration of investment data.
The release of this crucial economic data, originally slated for March 27, 2026, experienced a delay due to the government shutdown that spanned October and November of 2025. This extended period of federal government inactivity injected an element of uncertainty into the economic landscape, with analysts noting its potential to influence both immediate economic activity and the accuracy of subsequent data.
Key Drivers of Fourth-Quarter Growth
The uptick in real GDP during the fourth quarter was primarily propelled by increases in consumer spending and investment. Consumer expenditure, a cornerstone of the U.S. economy, continued its upward trajectory, signaling sustained demand. Investment, though revised downwards, also contributed positively to the overall growth. However, these positive contributions were partially counterbalanced by declines in government spending and exports. Imports, which are subtracted in GDP calculations, also decreased, a factor that typically boosts reported GDP figures.
Industry-Specific Performance
An examination of GDP by industry reveals a mixed performance. The private services-producing sector emerged as a key driver of growth, with its real value added increasing by 2.3 percent. This expansion was partly offset by contractions in both government (-7.8 percent) and private goods-producing industries (-1.8 percent). Within the services sector, wholesale trade, information services, and health care and social assistance were identified as the leading industry contributors to the overall increase in real GDP.
Economic Indicators Show Varied Trends
Several related economic measures provide a more granular view of the fourth-quarter economic activity. Real final sales to private domestic purchasers, a metric that aggregates consumer spending and gross private fixed investment, saw an increase of 1.8 percent. This figure was also revised downward by 0.1 percentage point from the prior estimate.
Real gross output, a measure of the total value of goods and services produced by the economy, experienced a decrease of 0.5 percent in the fourth quarter. This decline was influenced by significant contractions in private goods-producing industries (-3.2 percent) and government (-4.7 percent), which were partially mitigated by a 1.1 percent increase in private services-producing industries.
In contrast, real gross domestic income (GDI), which measures the income side of economic activity, showed a more positive trend, increasing by 2.6 percent. This followed a stronger 3.5 percent increase in the third quarter. The average of real GDP and real GDI, often considered a more comprehensive measure of economic performance, increased by 1.5 percent in the fourth quarter, down from 4.0 percent in the third quarter.
Corporate profits from current production, adjusted for inventory valuation and capital consumption, demonstrated robust growth, increasing by $246.9 billion in the fourth quarter, a notable rise from the $175.6 billion increase recorded in the third quarter.
Inflationary pressures, as measured by the price index for gross domestic purchases, increased by 3.7 percent. This figure was revised down slightly by 0.1 percentage point from the previous estimate. The Personal Consumption Expenditures (PCE) price index, a key inflation gauge closely watched by the Federal Reserve, rose by 2.9 percent, with the core PCE price index (excluding food and energy) also increasing by 2.7 percent, mirroring prior estimates.
Regional Economic Landscape
On a state-by-state basis, the economic landscape presented a varied picture. Real GDP increased in 35 states during the fourth quarter of 2025. North Dakota led the nation in growth, with its real GDP expanding at an annual rate of 3.8 percent, largely driven by the agriculture, forestry, fishing, and hunting sector. Conversely, the District of Columbia experienced a contraction of 8.3 percent, with federal civilian activities cited as the primary detractor. Indiana and Maine reported no change in their real GDP during the quarter.
Personal Income Trends Across States
Current-dollar personal income across the nation saw a significant increase of $217.9 billion, or 3.4 percent at an annual rate, in the fourth quarter. This growth was widespread, with 47 states and the District of Columbia reporting increases. Hawaii recorded the most substantial growth in personal income, at 41.5 percent annually, a figure significantly influenced by a settlement paid by a domestic electric utility to compensate households for losses related to the 2023 Maui wildfire. This settlement, recorded on an accrual basis, impacted corporate profits and was reflected in personal current transfer receipts. North Dakota, on the other hand, saw a decrease of 4.0 percent in personal income.
Earnings, a component of personal income, increased in 43 states, with Massachusetts experiencing the highest growth at 5.9 percent. Personal current transfer receipts, which include government benefits and other payments, increased in 42 states and the District of Columbia. Property income, encompassing dividends, interest, and rent, demonstrated broad-based growth, increasing in all 50 states and the District of Columbia.
Annual Economic Performance in 2025
Looking at the full year 2025, real GDP increased by 2.1 percent, a figure consistent with previous estimates. This annual growth was primarily driven by increases in consumer spending and investment. Industry-wise, private services-producing industries saw a 2.7 percent increase in real value added, while private goods-producing industries grew by 1.2 percent. Government industries experienced a marginal increase of less than 0.1 percent.
Regionally, real GDP grew in all 50 states and the District of Columbia in 2025, with South Carolina and Florida leading in growth at 3.1 percent. North Dakota reported the slowest growth at 0.3 percent.
The price index for gross domestic purchases rose by 2.6 percent for the full year 2025, matching prior estimates. The PCE price index increased by 2.6 percent, and the core PCE price index by 2.8 percent.
Real GDI for the full year 2025 increased by 2.4 percent, a deceleration from the 3.0 percent growth in 2024. The average of real GDP and real GDI grew by 2.3 percent in 2025, compared to 2.9 percent in the preceding year.
Corporate profits from current production saw a substantial increase of $275.7 billion in 2025, up from $184.4 billion in 2024.
Current-dollar personal income experienced a notable increase of 4.9 percent for the full year 2025. At the state level, personal income increased in all jurisdictions, with Hawaii showing the highest growth at 6.9 percent and the District of Columbia at 3.2 percent.
Impact of Government Shutdown and Maui Wildfire
The government shutdown, which lasted from October 1 to November 12, 2025, had an estimated impact on real GDP growth. While the full effects are embedded within the source data, the BEA estimated that a reduction in federal employee labor services subtracted approximately 1.0 percentage point from real GDP growth in the fourth quarter. The shutdown’s effect on current-dollar federal compensation was mitigated by back pay for furloughed employees.
The devastating Maui wildfires in August 2023 also had a residual impact on the fourth-quarter 2025 economic data. A $7.5 billion settlement for claims related to the wildfire was recorded in corporate profits, leading to a reduction in that measure. However, this impact was offset in the National Income and Product Accounts by recording the settlement as business current transfer payments, thus not affecting the GDI estimate.
Modernization of BEA Releases
In an effort to enhance accessibility and streamline data delivery, the BEA has implemented improvements to its GDP news release. This includes direct links to its interactive data tables, allowing users to access the most up-to-date information seamlessly. Consequently, the provision of separate PDF and Excel tables for news releases has been discontinued. Furthermore, GDP and personal income by state data have been accelerated to coincide with the third estimate of U.S. GDP, now being integrated into the main GDP news release.
Looking Ahead
The next release from the BEA is scheduled for April 30, 2026, at 8:30 a.m. EDT, which will feature the advance estimate for Gross Domestic Product in the first quarter of 2026. This will provide an early look at the economic trajectory as the nation moves into the new year.
Technical Notes on Revisions and Data Sources
The third estimate for real GDP in the fourth quarter of 2025 was revised downward by 0.2 percentage point primarily due to a downward revision in investment. The BEA utilizes a comprehensive set of source data and assumptions to formulate these estimates, with a detailed "key source data and assumptions table" available for public review. The BEA also addresses potential data imputation methods used during periods of federal agency disruption, such as the October prices data affected by the government shutdown, where geometric means were employed to derive estimated values.
The BEA’s ongoing commitment to modernizing its statistical products and improving data dissemination ensures that users have access to timely and comprehensive economic information, enabling a clearer understanding of the nation’s economic performance.
