US economy grows 4.3% in Q3, fastest expansion in two years

Exports surged 8.8%, and imports fell 4.7%, boosting GDP | Photo Credit: AMIT DAVE/Reuters

The US economy expanded at a surprisingly strong 4.3 per cent annual rate in the third quarter, the most rapid expansion in two years, as consumer and government spending, as well as exports, all grew.

US gross domestic product from July through September — the economy's total output of goods and services — rose from its 3.8 per cent growth rate in the April-June quarter, the Commerce Department said Tuesday in a report delayed by the government shutdown. Analysts surveyed by the data firm FactSet forecast growth of 3 per cent in the period.

However, inflation remains higher than the Federal Reserve would like. The Fed's favoured inflation gauge — called the personal consumption expenditures index, or PCE — climbed to a 2.8 per cent annual pace last quarter, up from 2.1 per cent in the second quarter.

Excluding volatile food and energy prices, so-called core PCE inflation was 2.9 per cent, up from 2.6 per cent in the April-June quarter.

Consumer spending, which accounts for about 70 per cent of US economic activity, rose to a 3.5 per cent annual pace last quarter, up from 2.5 per cent in the April-June period.

Consumption and investment by the government grew by 2.2 per cent in the quarter after contracting 0.1 per cent in the second quarter. The third quarter figure was boosted by increased expenditures at the state and local levels and federal government defence spending.

Private business investment fell 0.3 per cent, led by declines in investment in housing and in nonresidential buildings such as offices and warehouses.

However, that decline was much less than the 13.8 per cent dropoff in the second quarter.

Within the GDP data, a category that measures the economy's underlying strength grew at a 3 per cent annual rate from July through September, up slightly from 2.9 per cent in the second quarter. This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending.

Exports grew at an 8.8 per cent rate, while imports, which subtract from GDP, fell another 4.7 per cent.

Tuesday's report is the first of three estimates the government will make of GDP growth for the third quarter of the year.

Outside of the first quarter, when the economy shrank for the first time in three years as companies rushed to import goods ahead of President Donald Trump's tariff rollout, the US economy has continued to expand at a healthy rate.

That's despite much higher borrowing rates the Fed imposed in 2022 and 2023 in its drive to curb the inflation that surged as the United States bounced back with unexpected strength from the brief but devastating COVID-19 recession of 2020.

Though inflation remains above the Fed's 2 per cent target, the central bank cut its benchmark lending rate three times in a row to close out 2025, mostly out of concern for a job market that has steadily lost momentum since spring.

Last week, the government reported that the US economy gained a decent 64,000 jobs in November but lost 105,000 in October. Notably, the unemployment rate rose to 4.6 per cent last month, the highest since 2021.

The country's labour market has been stuck in a “low hire, low fire” state, economists say, as businesses stand pat due to uncertainty over Trump's tariffs and the lingering effects of elevated interest rates. Since March, job creation has fallen to an average 35,000 a month, compared to 71,000 in the year ended in March. Fed Chair Jerome Powell has said that he suspects those numbers will be revised even lower.

Published on December 23, 2025