Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results.
Last week’s fourth quarter gross domestic product (GDP) report came in at annualized pace of 1.4%, disappointing many Wall Street analysts who had anticipated 2.8%. For some investors, the news may have renewed concerns about an economic slowdown.
Growth was indeed softer than the 3% or more recorded in the previous two quarters, but the drivers of the miss are clear. The biggest drag was government spending at −0.9%, an unusually weak contribution that suggests the fourth quarter could have ended near 2.3% — above trend — absent the 43‑day government shutdown.
Consumption, the largest driver of GDP with about a 70% share, slowed slightly to 1.6%, yet it remains resilient and in line with the average since 2024. We believe fiscal stimulus, lower interest rates and a steady job market could support household balance sheets and spending going forward.
Taken together, the evidence suggests the government shutdown — rather than a broad slowdown — drove the shortfall. Consensus GDP is 2.5% this year, and our target of 2.3% closely matches, reflecting our confidence in the economy amid a steady job market and sustained consumer spending.
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MARK-892032-2026-02-25