'Yikes': Economists sound alarm after GDP revision reveals 'picture not looking good'

Economic numbers are in for the fourth quarter of 2025, and as one economist put it, “Yikes.” In a new report from the Commerce Department, it was revealed that economic growth was significantly slower than anticipated, while inflation climbed.

Gross domestic product — the sum total of all goods and services produced, which is considered a key measurement for the health of the economy — rose by just 0.7 percent in the final three months of the year, which was well below the 1.4 to 1.5 percent that was forecasted, and a major slowdown compared to the 4.4 percent gain of the previous period. As a result, the GDP increase for the first year of Trump’s second term was just 2.1 percent. For comparison, during Biden’s final year, growth was 2.8 percent.

“The key is consumer spending,” said economist Heather Long. “It was 2 percent in Q4. That's a clear slowdown from 3.5 percent in Q3. The government shutdown really hurt growth.”

At the same time, inflation was higher than economists wanted, though it was in line with their expectations. Core inflation rose by 0.4 percent in January, resulting in a final annual rate of 3.1 percent.

According to the Bureau of Economic Analysis and other experts, the latest GDP and inflation numbers were the result of a few key factors. The government shutdown reduced federal spending by 16.7 percent, which slashed 1.16 percent off the GDP. Trump’s tariffs hindered consumer spending without having a dramatic impact on import reduction — the latter being a central goal of the tariffs in the first place. And low job growth slowed spending even further.

This all paints an important picture of the economy in the lead-up to two major occurrences that will likely have a profound impact on the upcoming report for the first quarter of 2026: the Supreme Court striking down Trump’s tariffs, and the war in Iran.

"The latest personal consumption expenditures inflation data tells us that the inflation picture wasn't looking good even before the Middle East crisis," said financial analyst Sonu Varghese. Inflation “is only going to head higher as the energy shock comes through.”

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