Wall Street closes at a record for the first time since end of January
This was the second consecutive negative revision to fourth-quarter GDP.
The BEA reports Real gross domestic product (GDP) increased at an annual rate of 0.5 percent in the fourth quarter of 2025.
Real GDP was revised down 0.2 percentage point from the second estimate, primarily reflecting a downward revision to investment.
This was the second consecutive negative revision to fourth-quarter GDP.
Real Fourth-Quarter GDP and GDI Progression
- Real GDP: 0.5% from 0.7% from 1.4%
- Real Final Sales: 0.3% from 0.4% from 1.2%
- Real Final Private Domestic Sales: 1.8% from 1.9% from 2.4%
- Real Final Domestic Sales: 0.6% from 1.1%
- Real GDI: 2.6% Prior N/A
GDI is delayed by one release in the first three quarters of the year. For the fourth quarter, GDI is not available until the third (labeled final, but subject to later revisions) release.
On March 3, 2026, I commented Expect a Negative Revision to 2025 Q4 GDP. Two Reasons
My first reason was a a noticeable negative revision to construction spending that I thought would then hit GDP. It did.
My second reason was “with the economy generally weakening, other revisions rate to be negative as well. That is reason number two.”
The first revision was much bigger to the downside than I called for. The Bloomberg consensus was no change. Once again the Bloomberg consensus was no change.
We went from 1.4 percent to 0.5 percent with economists’ consensus expecting no change.
Contributions to GDP Progression
- PCE Services: 1.23 PP from 1.25 PP from 1.59 PP
- PCE Goods: 0.06 PP from 0.07 PP from -0.01 PP
- Government: -0.99 PP from -1.03 from -0.90 PP
- Residential Investment: -0.06 PP from -0.02 from -0.06 PP
- Nonresidential Investment: 0.33 PP from 0.28 from 0.51 PP
- CIPI: 0.14 PP from 0.28 from 0.21 PP
- Exports: -0.35 PP from -0.36 from -0.01 PP
- Imports 0.13 PP from 0.15 from 0.18 PP
CIPI stands for Change in Private Inventory.
Real Bottom Line Estimate
CIPI nets to zero over time. Real final sales is the true bottom line estimate of the economy.
RFS is now a very anemic 0.3 percent annualized.
The Fed likes to look at domestic sales where we have better numbers. Domestic Sales were 0.6 percent with Private Domestic Sale a better still 1.8 percent.
Much of difference between domestic sales and private domestic sales was the government shutdown.
But some of it is permanent DOGE-related and ongoing layoffs that did not happen for accounting purposes until October. So don’t expect full recovery in government spending.
Finally, negative revisions beget negative revisions. Expect more.
