The US economy picked up strong speed in the three months to September as consumer spending rose and exports rebounded. Economic output expanded at an annual rate of 4.3%, clearly beating expectations. Growth improved from 3.8% in the previous quarter and marked the fastest pace in two years.
The figures emerged after delays caused by a federal government shutdown. The report described an economy shaped by shifting trade policies, immigration changes, persistent inflation, and reduced government spending. These pressures caused sharp swings in trade flows. Despite that volatility, overall economic momentum remained strong and surpassed many forecasts.
Unexpected strength shocks forecasters
Aditya Bhave, senior economist at Bank of America, said the economy repeatedly overturned pessimistic forecasts since early 2022. He described the economy as highly resilient during an interview on a major international business programme. Bhave said he saw no clear reason for that strength to weaken in the near future.
Most economists had predicted slower growth. Forecasts pointed to annual expansion of about 3.2% in the third quarter. The final figures exceeded those expectations by a wide margin.
Consumers take the lead
Consumer spending delivered the biggest boost to growth. Household 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 during 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 mainly by higher defence outlays.
Investment and housing show weakness
Strong gains in consumption and trade offset weaker 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 pressures and tightened supply constraints.
Michael Pearce, chief US economist at Oxford Economics, said the economy approached 2026 from a position of strength. He said tax cuts and recent interest rate reductions should support activity. Pearce added that underlying indicators continued to point to steady expansion.
Inflation risks temper optimism
Donald Trump praised the figures on social media and credited tariffs for 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 persist.
Price pressures intensified during the quarter. The preferred inflation measure rose 2.8%, compared with 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 turning cautious. Surveys and credit card data suggested slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now constrained households.
