U.S. Economic Growth Slows Amid Government Spending Cuts and Rising Inflation

U.S. economic growth slowed notably in the fourth quarter due to a sharp decline in government spending, the largest since 1972, stemming from last year's shutdown. Despite this, consumer and business spending, particularly in AI, helped sustain a steady economic pace, while inflation driven by tariffs remains a concern.

The U.S. economy experienced a sharper-than-expected slowdown in growth during the fourth quarter, largely due to significant government spending cuts, reaching levels not seen since 1972, attributed to the previous year's shutdown. President Donald Trump highlighted this downturn, attributing it to the shutdown and promoting lower interest rates.

The gross domestic product increased by 1.4% on an annualized basis, missing the forecasts of a 3.0% rise. Conversely, the economy had expanded at a 4.4% pace in the third quarter. Consumer and business investment, notably in artificial intelligence, helped the economy remain resilient despite a challenging environment with heightened inflation concerns.

Consumer spending accounted for over two-thirds of economic activity, advancing at a 2.4% rate, while business investment in AI surged at 7.4%. Economists project that larger tax refunds might enhance consumer expenditure, yet inflation, partly driven by import tariffs, poses ongoing challenges as the Federal Reserve remains hesitant to cut interest rates amid persistent inflationary pressures.

(With inputs from agencies.)