By Trendsetter Tribune 
WASHINGTON — In a much-anticipated report released today, Friday, February 20, 2026, the Bureau of Economic Analysis (BEA) confirmed that the U.S. economy experienced a significant deceleration in the final months of 2025. Real GDP grew at an annual rate of 1.4% in the fourth quarter, a sharp drop from the robust 4.4% growth seen in the third quarter.
The report, which was delayed by several weeks due to the October–November government shutdown, highlights a “bifurcated” economy where strong business investment in AI is struggling to offset a cooling consumer sector and the fallout from the longest funding lapse in U.S. history.
The Shutdown Effect: A 1.0% GDP Hit
The 43-day partial government shutdown, which lasted from October 1 to November 12, 2025, left a measurable dent in the national output. While federal workers eventually received back pay, the disruption to services and the “lost hours” of productivity created a drag that could not be fully recovered.
- Direct Drag: The BEA estimates that the reduction in federal labor services subtracted approximately 1.0 percentage point from the headline GDP growth rate.
- Delayed Data: The “statistical blackout” caused by the shutdown led to the rescheduling of today’s report, leaving markets and the Federal Reserve “flying blind” throughout much of January.
- Spending Contraction: Total government spending and investment fell by 5.1% in Q4, a stark reversal from the growth seen earlier in the year.
Consumer Fatigue: The Goods Recession
Perhaps more concerning for the administration is the cooling of the American consumer. While overall consumer spending (PCE) remained positive, the drivers of that growth have shifted.
| Spending Category | Q4 Performance | Analysis |
| Services | +1.6 percentage points | Strong demand for health care and international travel continues to buoy the economy. |
| Durable Goods | -0.9% | A significant decline; analysts suggest “tariff front-running” in early 2025 exhausted demand for big-ticket items. |
| Non-Durables | +0.4% | Tepid growth as households grapple with food prices rising at a 3.1% annual pace (beef, coffee). |
The Silver Lining: AI and Business Investment
Despite the headline deceleration, the private sector remains a primary engine of resilience. Business investment added 0.5 percentage points to growth, driven almost entirely by the ongoing Artificial Intelligence boom.
- Data Centers: Real-term spending on data center construction reached $25.2 billion in late 2025, up 22% year-to-date.
- Intellectual Property: Investment in software and AI-related equipment accelerated, suggesting that firms are looking to productivity gains to offset a “low-hire” labor market.
The Administration’s “Boom” Forecast
President Trump and his economic team have dismissed the Q4 slowdown as a “shutdown-induced outlier.” On Thursday, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick predicted a massive rebound for 2026.
“This quarter—the first quarter of 2026—the United States of America’s $30 trillion economy will exceed 5% growth. By the end of the year, you’re going to see 6%.” — Howard Lutnick, Feb 2026
The administration is betting on a “twin-engine” stimulus in the coming months: historically large tax refunds from the “Big, Beautiful Bill” and potential interest rate cuts from the Federal Reserve as inflation (currently at 2.7%) slowly nears the 2% target.
Looking Ahead: The Midterm Economic Stakes
With the 2026 midterm elections looming, the “affordability crisis” remains the top concern for voters. While GDP growth is positive, the 4.5% unemployment rate and the rising cost of living have kept consumer sentiment “dour,” according to recent polling.