US Economy Posts Strongest Quarterly GDP Growth in Two Years at 4.3% in Q3 2025
The US economy grew at an annualized rate of 4.3% in the third quarter of 2025, marking the fastest quarterly growth in two years and surpassing economists' expectations of approximately 3.2%. This followed a 3.8% growth rate in the previous quarter. The increase was driven by higher consumer spending, which rose by 3.5% annualized, a 7.4% jump in exports, and a rebound in government spending led by defense. Meanwhile, investment fell, and imports declined, reflecting tariffs on shipments announced earlier in the year by President Donald Trump, who has stated that tariffs contributed to the growth.
Inflation, measured by the Personal Consumption Expenditures (PCE) price index, rose to 2.8% from 2.1% in the prior quarter. Despite the solid overall growth, the housing market and business investment cooled amid high interest rates. Consumer confidence decreased in December for the fifth consecutive month, marking the longest decline since 2008, with surveys suggesting slowing spending and stagnant real incomes, particularly impacting lower- and middle-income households.
The GDP data release was delayed due to the October-November 2025 federal government shutdown. Earlier in 2025, the economy had contracted in the first quarter due to fears of tariffs but rebounded with strong consumer spending and AI investment. The Federal Reserve cut interest rates three times in 2025 amid inflation remaining above 2% and a softer jobs market, with ongoing debate about future rate trajectories. Analysts expect solid economic expansion into 2026, supported by anticipated tax cuts and further rate cuts, with underlying data indicating a resilient economy. Tariff policies established under President Trump remain a political issue, with the Supreme Court currently assessing challenges related to these tariffs.
