The US economy strengthened markedly during the three months to September as consumers spent more and exports rebounded. Economic output expanded at an annual rate of 4.3%, comfortably above expectations. Growth improved from 3.8% in the previous quarter and reached the strongest pace in two years.
The figures came after delays linked to a federal government shutdown. The report portrayed an economy shaped by changing trade policies, immigration shifts, persistent inflation, and reduced public spending. These pressures caused sharp swings in trade activity. Despite that turbulence, overall momentum stayed firm and exceeded many forecasts.
Expansion defies negative predictions
Aditya Bhave, senior economist at Bank of America, said the economy consistently defied gloomy expectations since early 2022. He described current conditions as highly resilient during an interview on an international business programme. Bhave said he expected that resilience to continue in the months ahead.
Most economists had predicted weaker growth. Forecasts pointed to annual expansion of around 3.2% for the third quarter. The final result surpassed those projections by a wide margin.
Consumer spending powers growth
Household spending delivered the largest boost to economic output. Consumer spending rose at a 3.5% annual rate, compared with 2.5% in the previous quarter. Spending increased despite signs of cooling in the labour market. Households spent more on healthcare services over the period.
Imports continued to decline and reduced their drag on growth. The fall reflected new taxes on goods entering the country announced earlier this year. Exports rebounded strongly after earlier weakness and surged 7.4%. Government spending also recovered, driven largely by higher defence outlays.
Business investment and housing lag behind
Strong gains in consumption and trade offset slower business investment. Companies reduced spending, including investment in intellectual property. The housing market remained under pressure from elevated interest rates. High borrowing costs worsened affordability problems and reinforced supply constraints.
Michael Pearce, chief US economist at Oxford Economics, said the economy headed 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 risks weigh on outlook
Donald Trump welcomed the figures on social media and said tariffs drove the strong performance. He faced criticism as consumer confidence weakened and opinion polls showed dissatisfaction with his economic leadership. Several analysts questioned whether such rapid growth could last.
Price pressures intensified during the quarter. The preferred inflation measure rose 2.8%, up from 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 growing cautious. Surveys and credit card data pointed to slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now constrained households.
