US growth falls sharply to 1.4% annualised rate in fourth quarter
Financial Times
February 20, 2026
AI-Generated Deep Dive Summary
The US economy experienced a significant slowdown in the fourth quarter, with GDP growth falling to an annualized rate of 1.4%. This marked a sharp decline from expectations and reflects broader economic challenges, particularly the impact of reduced government spending during the federal shutdown. The decrease was far below what analysts anticipated, underscoring the severity of the situation.
A key factor behind this downturn was the substantial drop in government outlays, which declined at an 8.3% annualized rate. This included a significant reduction in both defense and non-defense spending. The shutdown disrupted federal activities, leading to fewer contracts and lower employee compensation, which are critical components of GDP calculations. This decline was more severe than during the Great Recession, highlighting the extent of the fiscal drag caused by the political impasse.
The broader implications of this growth slowdown are concerning for businesses and investors. Reduced consumer confidence, weaker business investment, and ongoing trade tensions have compounded the challenges faced by the US economy. These factors not only impact current economic performance but also raise questions about future growth prospects.
For businesses, this situation underscores the importance of navigating an uncertain economic landscape. The decline in GDP signals potential risks for corporate earnings, employment levels, and overall market sentiment.
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Originally published on Financial Times on 2/20/2026