US Q4 GDP slows to 1.4% annualized
Government shutdown subtracts output in national accounts, growth narrative turns into budget optics
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US economic growth slowed sharply at the end of last year, but the headline figure may say as much about Washington’s ability to stop working as it does about households and firms. The Commerce Department’s Bureau of Economic Analysis estimated fourth-quarter GDP rose at a 1.4% annualized rate, far below the 3.0% consensus forecast cited by Reuters and carried by Global News.
The federal government partially shut down, and when the state closes its doors, “government services” stop being produced—and therefore stop being counted. Global News notes the nonpartisan Congressional Budget Office estimated the shutdown shaved about 1.5 percentage points off Q4 growth via fewer services provided by federal workers, reduced federal purchases, and a temporary hit to SNAP benefits. A large chunk of the “slowdown” is not a mysterious collapse in private dynamism; it is a temporary withdrawal of state activity that national accounts treat as output.
That accounting treatment is not a conspiracy; it’s how GDP works. But it does highlight how much of “growth” is a budgetary derivative. When politicians can mechanically subtract (or add) output by turning appropriations on and off, investors should be cautious about narratives built on a single quarter.
Still, the private-side details were not uniformly reassuring. Global News reports consumer spending growth moderated from the prior quarter’s 3.5% pace, consistent with an economy leaning on higher-income households while inflation erodes purchasing power for everyone else. Meanwhile, trade data released after the survey window showed the deficit widened in December—exactly the kind of swing that can make net exports and inventories look like macro fundamentals when they are often just timing games.
Zero Hedge’s take frames the print as a “shutdown slam,” but the market problem is the mix: softer growth alongside firmer inflation. Global News notes the core PCE price index rose 0.4% month-on-month in December versus 0.3% expected, and traders still pegged the next Federal Reserve cut for June. That is a polite way of saying: markets are trying to price a slowdown without getting the usual monetary sugar rush.
Washington can both depress measured GDP by closing and then claim credit for a rebound by reopening—while the private economy absorbs the real costs of uncertainty, delayed payments, and regulatory limbo. The “resilient consumer” may be less of a hero than a statistic caught between a stop-start state and a central bank still pretending it can fine-tune reality.