The US economy expanded at its fastest rate in two years during the third quarter of 2025, buoyed by a powerful rebound in consumer spending that more than offset weaker investment growth.
Gross domestic product grew at an annualised rate of 4.3 per cent between July and September, according to revised figures from the US Bureau of Economic Analysis. The updated estimate was lifted from an initial 3.8 per cent reading and came in well above economists’ expectations of around 3.3 per cent growth. It marks the strongest quarterly performance since the third quarter of 2023 and an acceleration from the 3.8 per cent recorded in the previous quarter.
The figures underline the continued resilience of the world’s largest economy, which has significantly outperformed its G7 peers over the past year. By comparison, the UK posted annualised growth of just 0.4 per cent in the same period, while the eurozone expanded by roughly 1.2 per cent.
Household spending was the dominant driver of growth, contributing more than two percentage points to overall GDP expansion. Americans continued to spend robustly on services and discretionary items, helping to offset headwinds elsewhere in the economy. Government spending also provided a boost, while exports contributed positively as imports fell back following the introduction of tariffs earlier in the year.
Investment, however, was a mild drag on growth. While spending on artificial intelligence infrastructure remains elevated, the pace of expansion has slowed compared with earlier quarters, reducing its overall contribution to GDP.
Posting on Truth Social, President Donald Trump hailed the figures as evidence that the economy was thriving, writing that the “Trump Economic Golden Age is FULL steam ahead”.
The strong growth data is likely to complicate the outlook for US monetary policy. The Federal Reserve cut interest rates three times in 2025, but the latest GDP figures may strengthen the case for keeping borrowing costs on hold next year as policymakers weigh persistent inflation against signs of cooling in the labour market.
Inflationary pressures remain 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 previously. Core inflation, which strips out volatile food and energy prices, climbed to 2.9 per cent, moving further above the central bank’s 2 per cent target.
Financial markets reacted cautiously to the data. US equities opened modestly higher, with major indices rising by less than 1 per cent. Government bond prices slipped, pushing the yield on two-year Treasury notes up slightly as investors trimmed expectations for further rate cuts in 2026.
The dollar weakened against major currencies, falling to a three-month low, while gold continued its rally, hitting a fresh record as investors sought alternatives to US assets.
Economists expect momentum to slow in the final quarter of the year after a prolonged federal government shutdown weighed on activity, with consumer confidence surveys already showing sentiment at its weakest level in five years. Even so, the third-quarter figures confirm that the US economy entered the end of 2025 with considerable underlying strength.
