Q4 GDP Commentary from MBA's Joel Kan

The following is MBA VP and Deputy Chief Economist Joel Kan’s reaction to this morning’s U.S. Commerce Department report on Q4 GDP:

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“This morning’s advance estimate of fourth quarter GDP showed that economic growth slowed to 1.4 percent from the robust pace of the second and third quarters of 2025. Overall, the economy in 2025 grew slower than 2024, consistent with weaker hiring across many industry sectors and the upward trend in unemployment. The theme of uneven growth continues to be reflected in the data. While consumer spending was a primary driver of growth in the quarter, spending on goods declined slightly, while all the growth was concentrated in spending on services. Business fixed investment also supported the fourth quarter gain, primarily through increased investment in information processing equipment and intellectual property products. This indicates that companies are still heavily investing in technology. Residential investment contracted for the fourth consecutive quarter.

“We expect a similar pattern of economic growth in 2026, as households with sufficient income and wealth continue to drive most of the consumer spending, while pressure continues to build for other households under strain from higher costs, longer unemployment spells, and high consumer credit balances.

“PCE inflation was 2.8 percent compared to a year ago, a reacceleration from the third quarter’s 2.6 percent rate, with the core measure exhibiting a 2.9 percent increase. Both measures are above the Fed’s target and today’s report, and along with the strong January jobs report, suggest the lower likelihood of a rate cut at the next FOMC meeting.”