The US economy has suffered a shock slowdown as middle-class households are squeezed by cost of living pressures.

GDP growth dropped from 4.4pc in the third quarter to just 1.4pc in the last three months of the year, according to the Bureau of Economic Analysis (BEA).

This was far less than the 2.8pc economists had been expecting.

Overall across 2025, the first year of Donald Trump’s presidency, growth slowed to 2.2pc, down from 2.8pc in 2024. It was the slowest annual growth rate since 2022.

The economy suffered as consumer spending slowed, US exports fell and the longest government shutdown on record hit state spending.

The 43-day shutdown from the start of October triggered a plunge in government spending as federal employees were furloughed without pay. The BEA estimates the shutdown knocked one percentage point off GDP growth because of the reduction in services.

Even after the shutdown ended, real consumption rose by just 0.1pc in December, a fraction of the 0.7pc monthly growth recorded in the same month in 2024.

Posting on Truth Social just before the figures were published, Mr Trump cast blame on the Democrats and Jerome Powell, the Federal Reserve chairman, whom he has criticised heavily for being too slow to cut interest rates.

Mr Trump wrote: “The Democrat Shutdown cost the U.S.A. at least two points in GDP. That’s why they are doing it, in mini form, again.

“No Shutdowns! Also, LOWER INTEREST RATES. “Two Late” Powell is the WORST!!!”

The growth slowdown comes after a slew of data showing lower and middle-income earners in the US are struggling.

Figures from the Federal Reserve Bank of New York show the share of credit card borrowers who are more than 90 days behind on their payments has hit the highest level since 2011, while the share of newly delinquent mortgage loans has hit a decade high.

Separate figures from the BEA showed inflationary pressures are rising as Mr Trump’s trade tariffs flow through the economy.

The Personal Consumption Expenditures (PCE) index, a measure of inflation, rose from 2.8pc in November to 2.9pc in December, moving further away from the Federal Reserve’s 2pc target rate. Core inflation also climbed from 2.8pc to 3pc.

Paul Ashworth, the chief North America economist at Capital Economics, warned that core inflation likely rose even higher to 3.1pc at the start of this year.

The reaction on Wall Street was limited with the Dow Jones Industrial Average down 0.3pc but the tech-heavy Nasdaq up 0.2pc.

Traders slightly scaled back their bets on interest rate cuts by the Federal Reserve this year, indicating the next move could come as late as July.

However, it was not enough to boost the dollar, which was down 0.1pc against the pound after strong figures on Britain’s retail sales and private sector growth.

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