U.S. economic growth slowed more than previously reported in the fourth quarter of 2026, as weaker business investment and inventory accumulation outweighed a sharp rise in corporate profits, government data showed Thursday.
The Commerce Department’s Bureau of Economic Analysis reported that gross domestic product (GDP) grew at a revised annualized rate of 0.5%, down from the prior estimate of 0.7%. The initial advance estimate had placed growth at 1.4%. Economists surveyed by Reuters had expected the 0.7% figure to remain unchanged.
The downward revision reflected weaker business spending on intellectual property products and inventory build-up. Consumer spending, which accounts for more than two-thirds of the economy, was slightly revised down to a 1.9% growth rate from the previous 2.0%.
The slowdown from the third quarter’s 4.4% growth pace was influenced in part by last year’s government shutdown. Analysts note that neither the third- nor fourth-quarter GDP readings fully reflect the underlying health of the economy.
A measure of domestic demand—final sales to private domestic purchasers, which excludes government, trade, and inventories—grew at 1.8% in the fourth quarter, slightly below the prior estimate of 1.9%. In the July-September quarter, domestic demand expanded at 2.9%.
Corporate profits from current production surged to $246.9 billion in the fourth quarter, up from $175.6 billion in the third quarter, highlighting strong earnings despite slower overall growth.
From the income side, the economy grew at a 2.6% rate in Q4, compared with 3.5% in Q3. The average of GDP and gross domestic income (GDI), also called gross domestic output and considered a more comprehensive measure of economic activity, grew at 1.5% in the fourth quarter, down from 4.0% in Q3.
While economists expect growth to accelerate in the first quarter of 2026, uncertainty surrounding the U.S.-Israeli war on Iran is casting a shadow over the economic outlook.