World Business

US Q4 GDP growth revised lower to 0.5% as investment weakens, profits surge

T

Tanmay

Apr 10, 2026 2:01 PM IST

Category World

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Synopsis

US economic growth slowed more than expected in the fourth quarter, with GDP revised down to 0.5% amid weaker investment, even as corporate profits jumped sharply.

US GDP growth Q4 revised lower reflects a sharper-than-expected slowdown in the world’s largest economy, as weaker business investment offset strong corporate earnings, according to fresh data from the US Department of Commerce.

Key highlights

• US GDP growth revised down to 0.5% in Q4
• Business investment and inventories drag growth lower
• Consumer spending slightly downgraded
• Corporate profits surge strongly in the quarter
• Domestic demand growth moderates
• Middle East conflict clouds near-term outlook

Growth downgraded in final estimate

The US economy expanded at an annualised rate of 0.5% in the fourth quarter, down from the previously estimated 0.7% and well below the initial 1.4% reading.

The downward revision was largely driven by weaker business spending, particularly on intellectual property, as well as a slowdown in inventory accumulation.

Consumer spending shows slight moderation

Consumer spending, which accounts for more than two-thirds of economic activity, was revised slightly lower to a 1.9% growth pace from 2.0%.

While still positive, the moderation signals some softening in household demand compared to earlier estimates.

Domestic demand remains steady but softer

A key measure of underlying demand, final sales to private domestic purchasers, grew at a 1.8% pace, down from the earlier estimate of 1.9%.

This metric, closely watched by policymakers, suggests that core economic momentum is cooling from the stronger 2.9% growth seen in the previous quarter.

Corporate profits provide a bright spot

Despite weaker headline growth, corporate profitability surged in the fourth quarter.

Profits from current production rose by $246.9 billion, a sharp increase from $175.6 billion in the third quarter, indicating resilient business earnings even amid slowing activity.

Alternative growth measures show stronger picture

When measured from the income side, gross domestic income (GDI) grew at a 2.6% rate.

The average of GDP and GDI, often seen as a more balanced measure of economic 

Activity expanded at a 1.5% pace, highlighting a more moderate slowdown than headline GDP suggests.

What’s behind the slowdown?

The deceleration from the third quarter’s robust 4.4% growth was largely attributed to the impact of last year’s government shutdown and weaker investment trends.

Economists caution that both third- and fourth-quarter figures may not fully reflect underlying economic conditions.

Australia angle: Implications for global growth outlook

For Australia, softer US growth could influence global demand and commodity prices, impacting sectors linked to exports and the ASX 200.

A slower US economy may also shape expectations around global interest rates and capital flows.

Now what?

While growth may have picked up in the first quarter, the ongoing Middle East conflict, particularly involving Iran, poses fresh risks to the economic outlook.

Markets will closely watch upcoming data for signs of whether the slowdown is temporary or part of a broader trend.

FAQs

Q1: What was the revised US GDP growth for Q4?
It was revised down to 0.5% from the earlier estimate of 0.7%.

Q2: What caused the downgrade?
Weaker business investment and slower inventory accumulation.

Q3: How did consumer spending perform?
It grew at 1.9%, slightly below previous estimates.

Q4: Did any areas show strength?
Yes, corporate profits increased sharply during the quarter.

Q5: What are the risks ahead?
Geopolitical tensions and weaker global demand could weigh on future growth.

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