The US economy gained strong momentum in the three months to September as consumers increased spending and exports rebounded. Economic output expanded at an annual rate of 4.3%, beating expectations by a wide margin. Growth improved from 3.8% in the previous quarter and marked the fastest expansion in two years.
The figures followed delays caused by a federal government shutdown. The report showed an economy shaped by shifting trade policies, immigration changes, persistent inflation, and lower public spending. These factors triggered sharp swings in trade flows. Despite that instability, overall economic momentum remained firm and outperformed many forecasts.
Strength challenges bleak expectations
Aditya Bhave, senior economist at Bank of America, said the economy repeatedly challenged gloomy predictions since early 2022. He described current conditions as very resilient during an interview on a major international business programme. Bhave said he saw no reason for that resilience to fade in the near future.
Most economists had expected slower growth in the third quarter. Forecasts pointed to annual expansion of around 3.2%. The actual outcome exceeded those projections by a considerable margin.
Consumers provide main boost
Consumer spending delivered the largest contribution to growth. Household spending rose at a 3.5% annual rate, up from 2.5% in the previous quarter. Spending increased despite signs of cooling in the labour market. Households devoted more money to healthcare services.
Imports continued to decline and reduced their negative impact on growth. The fall reflected new taxes on goods entering the country announced earlier this year. Exports rebounded strongly after previous declines and surged 7.4%. Government spending also recovered, driven mainly by increased defence outlays.
Investment and housing drag lingers
Strong gains in consumption and trade offset a slowdown in business investment. Companies reduced spending, including investment in intellectual property. The housing market continued to struggle under elevated interest rates. High borrowing costs worsened affordability pressures and tightened supply constraints.
Michael Pearce, chief US economist at Oxford Economics, said the economy moved toward 2026 from a position of strength. He said tax cuts and recent interest rate reductions should support activity. Pearce added that underlying indicators remained consistent with steady expansion.
Inflation clouds outlook
Donald Trump praised the figures on social media and credited tariffs for the strong performance. He faced criticism as consumer confidence weakened and opinion polls showed dissatisfaction with his economic leadership. Some analysts questioned whether such rapid growth could continue.
Price pressures increased during the quarter. The preferred inflation measure rose 2.8%, compared with 2.1% in the previous quarter. Analysts warned that higher prices weighed most heavily on lower and middle income households. Higher income households continued to spend more freely.
Oliver Allen, senior US economist at Pantheon Macroeconomics, said recent data showed consumers turning cautious. Surveys and credit card data suggested slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now weighed on households.
