The US economy expanded at a 4.3% annualized rate in the third quarter, marking the fastest pace in two years, according to a report released Tuesday by the Bureau of Economic Analysis (BEA). The growth was supported by resilient consumer spending, increased business investment, and a moderation in trade tensions. The figure exceeded nearly all Bloomberg survey forecasts and followed a 3.8% growth rate in the previous quarter.
The BEA had originally scheduled the advance estimate for GDP on October 30, but the report was delayed due to the government shutdown. Typically, the agency releases three estimates per quarter, but for this period, only two will be provided, reflecting adjustments for the longest shutdown in US history.
Following the report, Treasury yields fell and equity futures extended declines. The data indicate that the US economy maintained momentum mid-year, with consumers leading growth while the most stringent tariffs under the Trump administration were rolled back. Economists expect that the fourth quarter may be impacted by the shutdown, but anticipate a modest rebound in 2026 as households receive tax refunds and as a potential Supreme Court ruling may overturn key global tariffs.
Federal Reserve Chair Jerome Powell cited supportive fiscal policies, AI-related data center investments, and sustained household consumption as drivers of expected faster growth in 2026. Policymakers currently project only one interest-rate cut in 2026, following three consecutive reductions to conclude this year.
Inflation and Consumer Spending
Despite growth, inflation remains above the Fed’s 2% target. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 2.9% in Q3. Consumer spending, the primary engine of growth, advanced at 3.5% annualized, with strong outlays on services such as healthcare and international travel, while spending on motor vehicles declined.
Business investment grew at 2.8%, fueled by record-level investments in data centers and continued spending on computer equipment. Separate data indicated a mixed picture for October business orders, with non-defense capital goods shipments—including aircraft—showing strength, pointing to continued momentum heading into Q4.
Trade, Inventories, and Final Sales
Net exports contributed roughly 1.6 percentage points to GDP growth. However, inventories and residential investment weighed on the overall figure. Economists are closely monitoring final sales to private domestic purchasers, a narrower measure of consumer and business activity, which grew 3%, the highest in a year.
Meanwhile, gross domestic income (GDI), another key economic gauge, rose 2.4%, down slightly from a revised 2.6% increase in Q2, highlighting the relationship between spending (GDP) and income generated from production.
Source: Bureau of Economic Analysis (BEA), Bloomberg
Disclaimer: This article is for informational purposes only and does not constitute investment, financial, or legal advice. Readers are advised to consult qualified financial professionals before making any investment decisions based on economic or market data.
