US economy grew at half the expected pace in the fourth quarter, dragging futures lower

• Stock futures fell sharply, with Nasdaq expected to open 0.5% lower, S&P 500 down 0.33%, and Dow down 0.25%
• Private sector spending and fixed investment grew at a healthier 2.4%, with AI-related equipment investment contributing 0.65 percentage points to overall growth
• President Trump blamed the shortfall on the government shutdown and called for lower interest rates ahead of the data release

US Economy Growth Disappoints, Futures Fall on Weak Q4 Data

Key Economic Data:

US fourth-quarter GDP growth came in at just 1.4% annualized, significantly missing economists' forecast of 2.9%. The disappointing figures, released Friday by the Bureau of Economic Analysis after a delay from a 43-day government shutdown, sent US stock futures lower, with Nasdaq futures down 0.5%, S&P 500 down 0.33%, and Dow down 0.25%.

Growth Drivers and Headwinds:

The sharp deceleration was primarily driven by falling government spending, which alone subtracted 0.9 percentage points from headline growth, along with declining exports and softer consumer activity. For full-year 2025, the economy grew 2.2%, down from 2.8% in 2024.

Positive Indicators:

Despite the weak headline number, underlying demand showed resilience. Private sector spending and fixed investment grew at 2.4%, indicating continued strength among businesses and households. AI-related investment emerged as a bright spot, with information processing equipment spending contributing 0.65 percentage points to overall growth.

Political Response:

President Trump, commenting on Truth Social before the release, attributed the shortfall to the government shutdown and reiterated his call for lower interest rates.

Market Implications:

The weaker-than-expected growth raises concerns about economic momentum heading into 2026 and could intensify pressure on the Federal Reserve regarding monetary policy decisions. However, the strong private sector performance and AI investment suggest selective areas of economic strength persist despite broader headwinds from government spending cuts.