WASHINGTON (AP).— La United States economy showed signs of weakening even before the start of the war with Iranaccording to data published on Friday by the Department of Commercewhich show a slowdown in growth, weakness in consumption and persistent inflationary pressures that could be aggravated by the recent increase in gasoline and energy prices.
The official report indicates that the gross domestic product (GDP) American grew at an annual rate of 0.7% between October and December, a figure revised downwards compared to the 1.4% initially estimated, reflecting a loss of momentum at the end of last year. The review confirms that economic progress fell sharply compared to the 4.4% recorded in the third quarter and the 3.8% in the second quarter.
The weakening was influenced, among other factors, by the federal government shutdown that lasted 43 days last fall, which reduced government spending and investment at a rate of 16.7%, subtracting 1.16 percentage points from last quarter’s growth.
“After two consecutive strong readings in the second and third quarters, the economy was expected to soften heading into the end of the year. It is now increasingly clear that the economy not only slowed, but stumbled as it crossed the finish line,” he said. Jim Baird, investment director of Plante Moran Financial Advisors. The specialist added that “the government shutdown was an important factor in the loss of momentum, but a sharp drop in consumption growth also influenced it.”
blow to the consumer
The data also show that the consumer spending —the main engine of the US economy— advanced weakly at the beginning of the year. In January it increased 0.4%, but only 0.1% after adjusting for inflation.
Personal income, adjusted for taxes and transfers, grew 0.9%, partly due to 2025 tax changes that reduced tax withholdings. However, wage growth cooled from the previous year and recent data indicates that households have reduced their level of savings, while lower-income families have accumulated higher levels of debt.
Inflation continues to be a pressure factor. An indicator closely followed by the Federal Reserve It rose 2.8% in January compared to the same month of the previous year, although economists predict that the figure could exceed 3.5% in the coming months.
The situation could be worsened by the increase in fuel prices. The national average price of gasoline rose to $3.63 per gallon, up from $2.94 a month ago, according to data from the American Automobile Association (AAA). During the war with Iran, the price has approached $4 per gallon, putting pressure on family budgets.
The economist KPMG boss Diane Swonkwarned that inflationary pressures were already observed before the conflict in Middle East. “Underlying inflationary pressures were already rising before the Middle East war and are set to intensify,” he said.
According to Swonk, some Federal Reserve officials could consider raising interest rates at their meeting next week, although the central bank will most likely keep its monetary policy unchanged.
Rising rates
Mortgage rates have increased since the start of the conflict, which could affect the US real estate market, which has been going through a decline since 2022, when financing costs began to rise after the lows reached during the pandemic.
At the same time, the labor market shows signs of weakness. Last month, businesses, nonprofits and government agencies cut 92,000 jobs, while through 2025 the economy has generated fewer than 10,000 jobs a month, the weakest non-recessionary hiring pace since 2002.
Although the companies published almost 7 million vacancies In January, compared to 6.6 million in December, hiring remained practically unchanged, suggesting business caution in the face of economic uncertainty and the possible impact of technologies such as artificial intelligence.
Consumer confidence also reflects this scenario. The index of the University of Michigan showed that general sentiment fell after the start of the conflict with Iran.
“Interviews completed before the military action in Iran showed an improvement in sentiment from last month, but the lower readings seen over the nine days afterward completely erased those initial gains,” explained Joanne Hsu, director of the survey.
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