US Q4 GDP revised down to just 0.7%; January core inflation rate at 3.1%

On March 11, 2026, in Miami, Florida, a customer shops at a grocery store. Data released by the U.S. Bureau of Labor Statistics on the same day show that, after seasonal adjustment, the Consumer Price Index (CPI) increased by 0.3% month-over-month, with a 12-month inflation rate of 2.4%.

The U.S. Department of Commerce announced on Friday that economic growth in the last three months of 2025 was significantly below expectations, while core inflation at the beginning of 2026 has risen.

According to the Bureau of Economic Analysis, the gross domestic product (GDP), which measures the total output of goods and services in the large U.S. economy, grew at an annualized rate of only 0.7% in the fourth quarter after seasonal and inflation adjustments.

This is the first revision of the GDP data, sharply down from the previous estimate of 1.4%, and well below the 1.5% consensus forecast by Dow Jones. Compared to a 4.4% increase in the previous quarter, economic growth has slowed considerably.

For the full year, 2025 GDP growth was 2.1%, down 0.1 percentage points from earlier estimates; the economy grew by 2.8% in 2024.

The Bureau of Economic Analysis stated that the downward revision was due to adjustments in consumer spending, government spending, and exports; the decline in imports (which technically would lower GDP) was also smaller than previously estimated.

Regarding inflation, January data largely met expectations, but price increases remain well above the Federal Reserve’s target level.

The Personal Consumption Expenditures (PCE) Price Index, a key inflation indicator used by the Federal Reserve, increased by 0.3% month-over-month in January after seasonal adjustment, with a 2.8% rise year-over-year. Economists surveyed by Dow Jones had expected increases of 0.3% and 2.9%, respectively.

Excluding volatile food and energy costs, core PCE inflation rose by 0.4% month-over-month in January, with a 3.1% increase over the past 12 months. Federal Reserve officials focus more on this core measure, viewing it as a better indicator of long-term inflation trends; this core reading increased by 0.1 percentage points from December.

Although the data is somewhat outdated, it still reflects inflationary pressures. This period coincides with the U.S. Supreme Court ruling to revoke several tariffs imposed by President Trump under the International Emergency Economic Powers Act. Economists generally believe that tariffs contributed approximately 0.5 percentage points or slightly more to inflation.

The report was released earlier than the early March U.S. strike on Iran. In the nearly two weeks since the conflict erupted, energy prices have surged, with the international benchmark Brent crude reaching $100 per barrel on Thursday.