Market Update: The US economy grew just 0.7% last quarter, ahead of a potentially destabilizing war with Iran – Full Analysis

Washington
 — 

US economic growth was even weaker than previously reported at the end of last year heading into President Donald Trump’s war with Iran.

Gross domestic product, the broadest measure of economic output, expanded at an annualized rate of 0.7% in the October-through-December period, the Commerce Department said Friday in its second estimate. That’s down sharply from the 1.4% rate initially reported, and a much slower pace than the 4.4% in the third quarter.

The latest estimate revised several output categories lower, including exports, consumer spending and government outlays.

The fourth quarter capped a tumultuous year for the US economy as Trump waged a bid to reshape global trade and businesses ramped up investments in AI while slamming the brakes on hiring. Yet, despite the uncertainty, American shoppers continued to open their wallets.

The US economy is currently facing the economic effects of Trump’s war on Iran, which has already sent oil prices skyrocketing and pushed up prices at the pump for Americans, with more inflation pain expected if the war broadens or is prolonged.

The oil shock comes as the US labor market remains in a precarious state, with employers shedding 92,000 jobs in February as the unemployment rate rose to 4.4% from 4.3%.

In another troublesome sign, American consumers weren’t rushing to spend more money at the start of this year as concerns about job security grew, a separate report from the Commerce Department showed Friday.

Consumer spending held firm at a 0.4% rate in January from December, according to Personal Consumption Expenditures data. That matters for the broader economy, since spending represents about two-thirds of US economic activity.

However, the Federal Reserve’s preferred inflation gauge showed slight improvement in January, according to the same report. On an annual basis, it grew at 2.8% versus 2.9% in December. And on a monthly basis, inflation was up 0.3% compared to 0.4% in December.

This story is developing and will be updated.