This was the second consecutive negative revision to fourth-quarter GDP.
The BEA reports Real gross domestic product (GDP) increased at an annual rate of 0.5 percent in the fourth quarter of 2025 .
Real GDP was revised down 0.2 percentage point from the second estimate, primarily reflecting a downward revision to investment.
This was the second consecutive negative revision to fourth-quarter GDP.
Real Fourth-Quarter GDP and GDI Progression
- Real GDP: 0.5% from 0.7% from 1.4%
- Real Final Sales: 0.3% from 0.4% from 1.2%
- Real Final Private Domestic Sales: 1.8% from 1.9% from 2.4%
- Real Final Domestic Sales: 0.6% from 1.1%
- Real GDI: 2.6% Prior N/A
GDI is delayed by one release in the first three quarters of the year. For the fourth quarter, GDI is not available until the third (labeled final, but subject to later revisions) release.
On March 3, 2026, I commented Expect a Negative Revision to 2025 Q4 GDP. Two Reasons
My first reason was a a noticeable negative revision to construction spending that I thought would then hit GDP. It did.
My second reason was “with the economy generally weakening, other revisions rate to be negative as well. That is reason number two.”
The first revision was much bigger to the downside than I called for. The Bloomberg consensus was no change. Once again the Bloomberg consensus was no change.
We went from 1.4 percent to 0.5 percent with economists’ consensus expecting no change.
Percentage Point Contributions to GDP
Contributions to GDP Progression
- PCE Services: 1.23 PP from 1.25 PP from 1.59 PP
- PCE Goods: 0.06 PP from 0.07 PP from -0.01 PP
- Government: -0.99 PP from -1.03 from -0.90 PP
- Residential Investment: -0.06 PP from -0.02 from -0.06 PP
- Nonresidential Investment: 0.33 PP from 0.28 from 0.51 PP
- CIPI: 0.14 PP from 0.28 from 0.21 PP
- Exports: -0.35 PP from -0.36 from -0.01 PP
- Imports 0.13 PP from 0.15 from 0.18 PP
CIPI stands for Change in Private Inventory.
Real Bottom Line Estimate
CIPI nets to zero over time. Real final sales is the true bottom line estimate of the economy.
RFS is now a very anemic 0.3 percent annualized.
The Fed likes to look at domestic sales where we have better numbers. Domestic Sales were 0.6 percent with Private Domestic Sale a better still 1.8 percent.
Much of difference between domestic sales and private domestic sales was the government shutdown.
But some of it is permanent DOGE-related and ongoing layoffs that did not happen for accounting purposes until October. So don’t expect full recovery in government spending.
Finally, negative revisions beget negative revisions. Expect more.
This post originated on MishTalk.Com
Thanks for Tuning In!
Mish
Never gets old
https://x.com/princesleeper/status/2034461728755589563
Perhaps it was “irrational exuberance” rearing it’s head once again.
Everyone must get acclimated, therein lies the future.
Stagflation happened.
The primary economic growth engine for jobs and wages is the expansion of global corporate and private debt. China is currently a better example than the US. Its corporate 160% debt to GDP has been invested in the production of real goods exportable to the world, which has raised the standard of living and increased wages and jobs for its citizens. Over the last 30 years many US corporations have raised debt targeting paper profits at the expense of US goods production, job and wage growth. The 2025 US massive private debt expansion in AI and tech ironically lessens job and wage growth – bad for a ‘human’ service based economy. 25 Feb 2026 was the peak valuation for ACWI, the global proxy equity ETF. The macroeconomic system is in the midst of a 20 Feb to 24 April 2026 global equity crash whose peak valuation was dependent on exuberant private and corporate global credit expansion which caused asset overproduction and leveraged asset extreme overvaluation. The coincidental Israeli-Trump war while a real accelerant, is not the cause of the ongoing and inevitable private and corporate bad-debt bubble – and equity and all asset- collapse.
The economy so hot Disney laying off 1000 employees, marketing and right before summer season?
https://www.cnbc.com/2026/04/09/disney-layoffs-ceo-josh-damaro.html
It’s all falling apart as expected under the Trump/GOP regime. They will get 100% of the blame for the recession. 100%
The FED is responsible. Short-term money flows, the proxy for real output, has fallen.
All boom/busts since WWII have been the FED’s fault. Monetary policy objectives should not be in terms of any particular rate or range of growth of any monetary aggregate. Rather, policy should be formulated in terms of desired RoC’s in monetary flows relative to RoC’s in R-gDp;
see Analysis of bank debits as a business cycle indicator (richmond.edu)
More goobleygook from you.
The Fed last raised (overnight Fed Funds) rates in July 2023 – almost 3 years ago.
Then it started lowering those rates in September 2024 – over 1.5 years ago.
But the most recent slowdown in GDP and the economy is entirely the Fed’s fault? And nothing to do with Trump’s changes in tax/tariff/spending policies starting a year ago?
So, it’s not tax cuts? You just negated 50 years of Republican economic orthodoxy.
Not entirely untrue, but for the midterms, Taco and his henchmen will be responsible.
It is more sinister this time. The FED is messing with the amount of money (interest) it takes to borrow a treasury for collateral. The whole plumbing of the market and liquidity depend on borrowing treasuries for collateral. You need collateral to purchase oil.
If you have been following the MOVE index (US Bond Volatility Index) the FED started to intercede in the bond market on Thursday March 26th where the MOVE index diverged from the price of oil.
Nothing ever good comes out of the FED meddling in the market. For interest rates, the FED follows the 2-year treasury. The FED causes issues when they diverge from the 2-year rate. (i.e.. transitory). Boom!!! FED caused inflation to be worse than it should have been. What good is all the FED intersection if we delay the repercussions of the commercial real estate crash, the consequences of the yield curve inverting and uninventing and price discovery of assets? All it does is hide fraud and zombies until it all happens at once. What happens when the FED stops supporting collateral?
The biggest tide in the history of skinny dipping!!! I guess we find out who is swimming naked deep in the end . (Banks).
A world of chaos and uncertainty presents opportunity for looters and pirates, but not good for the growth of a stable economy
Is it difficult to see whose side this admin is on?
Who needs GDP when you have taco continuing to manipulate the financial markets? In addition, wall street analysts are saying are going to “blow out” earnings to the upside.
Yes, yes, yes!
The DOW. That’s what everyone should be talking about, certainly not real income.
The DOW is very biased.
S&P 500 is better.
The Russel 2000 even better.
The Wilshire 5000 even more comprehensive.
I want to know how the economy is doing, not a twisted impression.
True, but DOW 50,000 was the Trump battle cry,,,at least for a couple of weeks….lol.