U.S. Economy Surges with 4.3% Growth in Q3/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The U.S. economy expanded at a robust 4.3% annual rate in the third quarter, outpacing expectations. Growth was fueled by consumer spending, exports, and government activity, though inflation remains elevated. The Federal Reserve continues to monitor inflation as job market signals weaken.
U.S. Economic Growth Quick Looks
- GDP rose 4.3% in Q3, exceeding 3% forecast
- Consumer spending increased 3.5%, up from 2.5% in Q2
- Inflation climbed to 2.8%, above Fed’s target
- Core inflation (excluding food/energy) hit 2.9%
- Exports surged 8.8%, imports dropped 4.7%
- Private sector strength measured at 3% growth rate
- Labor market shows signs of slowing momentum
- Fed cut interest rates three times to close 2025
- Unemployment rose to 4.6%, highest since 2021
- Job creation averaged 35,000 per month since March
Deep Look: U.S. Economy Grows 4.3% in Third Quarter, Driven by Spending and Exports
The U.S. economy continued to show resilience in the face of higher borrowing costs and global uncertainty, expanding at an unexpectedly strong 4.3% annual rate in the third quarter of 2025. The Commerce Department’s latest data release showed broad-based growth fueled by consumer spending, exports, and increased government outlays.
Gross Domestic Product (GDP) — the total value of goods and services produced — improved from the 3.8% growth rate recorded in the second quarter. Analysts had forecast a 3% increase, making the current performance a clear upside surprise.
A major driver of the economy’s strength was consumer spending, which accounts for roughly 70% of U.S. economic activity. That category climbed at a 3.5% annual rate, up from 2.5% the previous quarter. American households showed increased activity in purchasing goods and services, despite concerns about inflation and higher interest rates.
Exports also contributed significantly to GDP growth, rising by 8.8%. Meanwhile, imports, which subtract from GDP calculations, declined by 4.7%, helping to boost the overall figure.
However, inflation remains a challenge. The Personal Consumption Expenditures (PCE) index, which is closely watched by the Federal Reserve, rose to a 2.8% annual pace last quarter. Core PCE, which excludes volatile food and energy prices, came in at 2.9%, up from 2.6% in the previous quarter. Both metrics remain above the Fed’s 2% target.
One category within the GDP report, designed to reflect the economy’s underlying strength by excluding volatile sectors such as exports, inventories, and government spending, posted a 3% growth rate, slightly above the previous quarter’s 2.9%. This measure, which focuses on consumer spending and private investment, highlights continued confidence in core sectors.
Tuesday’s report marks the first of three estimates for third-quarter GDP growth, with potential revisions expected in the coming weeks.
Outside of a first-quarter contraction earlier this year — triggered by companies rushing to import goods ahead of President Donald Trump’s tariff implementations — the U.S. economy has remained on a solid upward path. That growth has persisted despite significantly higher interest rates introduced by the Federal Reserve in 2022 and 2023 to counter post-pandemic inflation.
In response to the shifting economic picture, the Fed cut its benchmark interest rate three times in late 2025, aiming to support a labor market that has gradually lost steam throughout the year.
The job market, once red-hot, has cooled. The government recently reported a net gain of 64,000 jobs in November, but that followed a loss of 105,000 in October. The unemployment rate ticked up to 4.6%, the highest level seen since 2021.
Economists describe the current labor market as being in a “low hire, low fire” state — businesses are cautious, neither hiring aggressively nor letting workers go in large numbers. Much of this hesitation is tied to uncertainty around tariffs and the lingering effects of elevated interest rates.
Since March, average monthly job creation has slipped to 35,000, down from 71,000 during the previous 12-month period. Federal Reserve Chair Jerome Powell has publicly acknowledged that he expects those job numbers to be revised further downward.
Despite the mixed signals from the labor market and stubborn inflation, the overall third-quarter growth figure points to an economy that continues to outperform expectations.
You must Register or Login to post a comment.