Weak GDP kept a near‑term Fed pivot looking distant for housing
Fourth‑quarter US growth came in far softer than markets have pencilled in, complicating expectations around the Federal Reserve’s next move and extending an uneasy wait for mortgage professionals hoping for a decisive break lower in rates.
Real gross domestic product rose at an annualised 1.4% in the fourth quarter, badly missing forecasts that ranged as high as 2.9% and marking a slowdown from the third quarter’s 4.4% pace.
The Bureau of Economic Analysis said the deceleration “reflected downturns in government spending and exports and a deceleration in consumer spending that were partly offset by an acceleration in investment.”
Personal consumption expenditures grew 2.4%, down from 3.5%, while exports slipped 0.9%.
The record‑length government shutdown loomed large over the report. BEA officials estimated it subtracted about 1 percentage point from GDP, even as they cautioned that the full impact cannot be quantified.
Underlying private‑sector demand stayed firm even as headline GDP disappointed. Real final sales to private domestic purchasers – a key Fed‑watched gauge that strips out trade and government – rose 2.4% in the quarter.
“Compared to the third quarter, the deceleration in real GDP in the fourth quarter reflected downturns in government spending and exports and a deceleration in consumer spending that were partly offset by an acceleration in investment,” the BEA said.
For lenders and originators, a soft GDP print on its own has not forced the Fed into an aggressive easing cycle. Federal Open Market Committee meetings stressed that officials looked for greater confidence in the growth and labor‑market outlook before committing to faster cuts.
Markets largely expect officials to stay on hold at their next meeting and to deliver no more than a couple of additional cuts this year, keeping mortgage pricing tethered to gradual shifts in Treasury yields rather than to a clear‑cut policy pivot.
With 2025 GDP still up 2.2% for the year and core demand metrics holding up, the latest data keeps the Fed on a cautious path and leaves the mortgage industry planning around a slow, uneven adjustment rather than a sudden drop in funding costs.
Meanwhile, president Donald Trump, who warned ahead of the release that the number would be soft, pinned the blame squarely on the standoff in Washington.
“The Democrat Shutdown cost the U.S.A. at least two points in GDP,” he said in a Truth Social post.
“That’s why they are doing it, in mini form, again. No Shutdowns! Also, LOWER INTEREST RATES. ‘Two Late’ Powell is the WORST!!!” The “at least two points” hit has not been independently verified and goes beyond the BEA’s own estimate.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
