The US economy strengthened sharply in the three months to September as consumer spending rose and exports recovered. Economic output expanded at an annual rate of 4.3%, far above expectations. Growth increased from 3.8% in the previous quarter and marked the strongest pace in two years.
The data appeared after delays caused by a federal government shutdown. The report described an economy shaped by changing trade rules, immigration shifts, persistent inflation, and lower public spending. These forces caused sharp movements in trade flows. Despite that volatility, the broader economy maintained solid momentum and exceeded many forecasts.
Momentum holds despite uncertainty
Aditya Bhave, senior economist at Bank of America, said the economy repeatedly defied pessimistic forecasts since early 2022. He described current conditions as highly resilient during an interview on an international business programme. Bhave said he saw no reason for that strength to fade in the near future.
Many economists had expected weaker results. Forecasts pointed to growth of around 3.2% in the third quarter. The final figures exceeded those estimates by a wide margin.
Spending surge drives expansion
Consumer spending provided the largest lift to growth. Household spending rose at a 3.5% annual rate, up from 2.5% in the previous quarter. Spending increased despite signs of cooling in the labour market. Households spent more on healthcare services.
Imports continued to decline and reduced their negative impact on growth. The fall reflected new taxes on goods entering the country announced earlier this year. Exports rebounded strongly after earlier declines and surged 7.4%. Government spending also recovered, driven mainly by higher defence outlays.
Investment and housing remain under strain
Strong gains in consumption and trade offset weaker business investment. Companies reduced spending, including investment in intellectual property. The housing market continued to struggle under elevated interest rates. High borrowing costs worsened affordability pressures and reinforced 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 remained consistent with steady expansion.
Inflation threatens longer-term strength
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 continue.
Price pressures intensified during the quarter. The preferred inflation measure rose 2.8%, compared with 2.1% previously. Analysts warned that higher prices weighed 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 growing cautious. Surveys and credit card data suggested slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now weighed on households.
