The US economy grew at its fastest pace in two years during the third quarter of 2025, driven by a rebound in consumer spending that offset weaker business investment. Revised data from the US Bureau of Economic Analysis showed gross domestic product expanded at an annualised rate of 4.3 per cent between July and September. This marked an increase from the initial 3.8 per cent estimate and exceeded economists’ forecasts of around 3.3 per cent.
The growth rate is the highest since the third quarter of 2023 and builds on the previous quarter’s 3.8 per cent expansion. By comparison, other major economies lagged behind, with the UK posting just 0.4 per cent growth and the eurozone expanding roughly 1.2 per cent over the same period.
Household spending was the main driver, contributing more than two percentage points to overall GDP growth. Americans continued to spend heavily on services and discretionary items, countering headwinds in other parts of the economy. Government spending also added to growth, while exports rose as imports fell following the introduction of tariffs earlier in the year.
Investment remained a drag on the economy. While spending on artificial intelligence infrastructure continued, the pace of expansion slowed compared with earlier quarters, limiting its contribution to GDP.
The growth figures were welcomed by former President Donald Trump, who posted on Truth Social that the data showed the “Trump Economic Golden Age is FULL steam ahead.”
The report may complicate the outlook for US monetary policy. The Federal Reserve cut interest rates three times in 2025, but the strong GDP figures could strengthen arguments for holding borrowing costs steady in 2026. Policymakers face a balancing act between persistent inflation and signs of a cooling labour market.
Inflation remains a concern. The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose to 2.8 per cent in the third quarter from 2.1 per cent in the previous quarter. Core inflation, which excludes food and energy prices, climbed to 2.9 per cent, further above the Fed’s 2 per cent target.
Markets reacted cautiously to the data. US equities opened slightly higher, with major indices gaining less than 1 per cent. Government bond prices fell, pushing two-year Treasury yields up, while the dollar weakened to a three-month low against major currencies. Gold hit a fresh record as investors sought alternatives to US assets.
Economists expect growth to moderate in the final quarter of the year after a prolonged federal government shutdown weighed on activity. Consumer confidence surveys show sentiment at its weakest level in five years. Even so, the third-quarter figures underline the underlying resilience of the US economy as it heads into 2026.
