The US economy expanded at the fastest pace in two years in July-September 2025, bolstered by resilient consumer and business spending and calmer trade policies.
The inflation-adjusted GDP, which measures the value of goods and services produced in the US, increased at a 4.3% annualised pace, a Bureau of Economic Analysis report showed Tuesday. That was higher than all but one estimate in a Bloomberg survey and followed 3.8% growth in the prior period.
The BEA was originally due to publish an advance estimate of US GDP on 30 October but the report was canceled due to the government shutdown. The agency typically releases three estimates of quarterly growth—fine-tuning its projections as more data comes in—but it will only release two for the period leading up to the longest shutdown on record.
The delayed report card shows that the US economy maintained momentum through the middle of the year as consumers powered ahead and the most punitive of President Donald Trump’s tariffs were rolled back.
While the US government shutdown is expected to weigh on fourth-quarter growth, economists expect a modest rebound in 2026 when households receive tax refunds, and an anticipated Supreme Court ruling may strike down Trump’s sweeping global tariffs.
The US Federal Reserve’s latest projections echo that sentiment, with Chair Jerome Powell citing supportive fiscal policy, spending on AI data centres and continued household consumption as reasons for the central bank’s forecast for faster growth next year. Policymakers are projecting just one interest-rate cut in 2026 after three straight reductions to end this year.
Part of the reason for some officials’ hesitation to lower borrowing costs much more is because inflation remains above their 2% target. The report showed the Fed’s preferred inflation metric—the personal consumption expenditures price index, excluding food and energy—rose 2.9% in the third quarter. The BEA has yet to reschedule the October or November monthly PCE data.
Demand Snapshot
Consumer spending—the main growth engine of the US economy—advanced at a 3.5% annualised pace. That reflected solid outlays on services, including healthcare and international travel. Spending on motor vehicles fell.
However, a softer labour market and high cost of living represent hurdles for the consumer in 2026. That combination has created a more notable divide in household spending by income.
Business investment expanded at a 2.8% rate, driven by another strong quarter for outlays on computer equipment. Investment in data centres, which house the infrastructure for AI, climbed to a fresh record.
US orders for business equipment fell by more than forecast in October. Non-defence capital goods shipments including aircraft, which feed directly into the equipment investment portion of GDP, were stronger than expected, indicating some momentum headed into the fourth quarter.
Figures on industrial production and manufacturing activity in October and November are due later this morning.
Final Sales
Net exports added about 1.6 percentage points to GDP growth after seesawing in the first half of the year. The goods and services that aren’t produced in the US are deducted from the GDP calculation but counted when consumed. The inventories and residential investment both weighed on growth.
Because swings in trade and inventories have distorted overall GDP this year, economists are paying closer attention to final sales to private local purchasers—a narrower metric of consumer demand and business investment. This measure climbed 3%, the most in a year.
The government’s other main gauge of economic activity—gross domestic income—rose 2.4% after a revised 2.6% annualised advance in the second quarter.
Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services.
The report includes fresh figures on corporate profits, which rose 4.2% in the third quarter, the most this year. A measure of after-tax profits for nonfinancial firms as a share of gross value added—a proxy for margins—has tightened this year, though remains well above levels that prevailed from the 1950s to the pandemic.
The next and final estimate of third-quarter GDP will come out on 22 January. The BEA has yet to determine a new date for its initial fourth-quarter and full-year 2025 estimates, which were originally due on 29 January. The agency said it won’t have “sufficient” data by then.
