The U.S. gross domestic product (GDP) growth rate has been revised lower, indicating that the record-breaking government shutdown weighed more heavily on the economy than initially reported.

During the October–December period, the economy expanded 0.7 percent, down from the first estimate of 1.4 percent, according to new Bureau of Economic Analysis data released on March 13.

This is also substantially down from the 4.4 percent growth registered in the third quarter.

The changes were reflected in downward adjustments to consumer spending, exports, government spending, and investment. Imports fell less than previously projected.

“BEA estimates that this reduction in services provided by the federal government subtracted about 1.0 percentage point from real GDP growth in the fourth quarter,” the bureau said in the report.

Government outlays declined by 5.8 percent from the initial reading of 5.1 percent. The fourth-quarter drop was caused entirely at the federal level, falling by 16.7 percent.

Economists had warned throughout the quarter that the spending impasse could weigh on growth prospects. Meanwhile, Trump administration officials and market watchers said various forecasts had signaled enormous growth for the final three months of 2025.

Personal consumption expenditures rose by 2 percent, down from the advanced estimate of 2.4 percent, adding to worries that consumers are pulling back amid economic uncertainty.

The rise was driven primarily by services spending (2.7 percent) compared to goods (0.4 percent).

Exports decreased by 3.3 percent, while imports dropped to 1.1 percent.

Last year’s trade deficit slipped to $901 billion, while remaining the third-largest ever, distorted by companies racing to stock up on foreign goods before the administration’s tariffs took effect.

For the full year, GDP growth was 2.1 percent, little changed from the previous measure. This was down from 2024’s 2.8 percent expansion.

On the inflation front, the fourth-quarter personal consumption expenditure (PCE) price index was 2.9 percent, unchanged from the first estimate. Core PCE, which excludes food and energy, also came in at 2.7 percent—the same as the original reading.

Expectations for the 1st Quarter

The figures are backward-looking and precede the Iranian conflict.

Looking ahead to the first quarter, the U.S. economy now faces the uncertainty from the war in Iran.

According to the Atlanta Federal Reserve’s GDPNow model, growth is expected to be 2.7 percent.

Economic observers argue that the United States is far more insulated from Middle East oil shocks than in previous years, mainly due to the acceleration in domestic oil and natural gas production.

“In the U.S., vulnerability to oil price shocks have diminished dramatically in recent decades with production ramping up following the shale revolution—from 5.4 million barrels a day in 2004 to 13.5 million barrels a day in 2025,” RBC Economics strategists said in a March 11 research note.

“While the overall impact on economic growth may be neutral, regional effects will likely vary considerably.

“Benefits of higher oil prices will be concentrated in producing regions, while costs of higher gasoline prices will affect consumers nationwide.”

Market Reaction

Investors shrugged off the worse-than-expected GDP from the final three months of 2025.

The leading benchmark average indexes attempted to stage a rebound at the end of the trading week, rising by about 0.6 percent.

“Uncertainty is often the neighbor of opportunity for investors who have the time horizon to withstand it,” Eric Clark, portfolio manager at Accuvest Global Advisors, said in a note emailed to The Epoch Times.

“A large correction has already taken place in the average stock, and the major indexes may still need to catch down for that process to fully play out.”

The blue-chip Dow Jones Industrial Average is poised for a weekly loss of about 2 percent. The tech-heavy Nasdaq Composite Index and broader S&P 500 are also poised for a weekly drop of around 2 percent.

Yields on U.S. Treasury securities were mainly in the red. The benchmark 10-year fell to around 4.25 percent.

The U.S. Dollar Index, a gauge of the greenback against a weighted basket of currencies, held onto its gains to finish the trading week. The index rose by 0.4 percent on March 13 and will register a weekly gain of more than 1 percent. Year-to-date, the index is up by nearly 2 percent.

GDP numbers come days before the Federal Reserve will hold its two-day monetary policy meeting.

The Fed is widely expected to leave interest rates unchanged, but President Donald Trump said the central bank should lower the benchmark federal funds rate right away.

“Where is the Federal Reserve Chairman, Jerome ‘Too Late’ Powell, today? He should be dropping Interest Rates immediately, not waiting for the next meeting!” the president said in a March 12 Truth Social post.

The futures market is betting on a quarter-point rate cut in September, according to data from the CME FedWatch Tool.