With increases in consumer spending, exports, and government expenditure, the U.S. economy grew at an unexpectedly robust 4.3% annual rate in the third quarter.
In a report delayed by the government shutdown, the Commerce Department reported on Tuesday that the U.S. gross domestic product from July to September the economy's entire output of goods and services rose from its 3.8% growth rate in the April–June quarter. According to a study conducted by the data firm FactSet, analysts predict 3% increase during that time.
Inflation is still greater than the Federal Reserve would like, though. The personal consumption expenditures index, or PCE, the Fed's preferred measure of inflation, increased from 2.1% in the second quarter to 2.8% annually last quarter.
So-called core PCE inflation increased from 2.6% in the April-June quarter to 2.9% when volatile food and energy prices were taken out.
Approximately 70% of U.S. economic activity is attributed to consumer expenditure, which increased from 2.5% in the April-June period to 3.5% annually last quarter.
From July to September, a category in the GDP data that gauges the underlying strength of the economy increased at an annual pace of 3%, up somewhat from 2.9% in the second quarter.
Consumer expenditure and private investment are included in this category, although volatile factors like exports, inventories, and government spending are not.
While imports, which reduce GDP, decreased by an additional 4.7%, exports increased at a rate of 8.8%. The first of the government's three projections of GDP growth for the third quarter of this year was released on Tuesday.
The U.S. economy has continued to grow at a strong clip, with the exception of the first quarter, when it shrank for the first time in three years as businesses hurried to import products ahead of President Donald Trump's tariff launch.
This is true even though the Fed raised borrowing rates significantly in 2022 and 2023 in an effort to control the inflation that skyrocketed when the US unexpectedly recovered from the catastrophic but short-lived COVID-19 recession of 2020.
The central bank lowered its benchmark lending rate three times in a row to finish 2025, despite the fact that inflation is still higher than the Fed's 2% target.
This was primarily due to worries about a job market that has been progressively losing steam since spring. The government revealed last week that while the U.S. economy lost 105,000 jobs in October, it gained a respectable 64,000 jobs in November. Interestingly, last month's jobless rate increased to 4.6%, the most since 2021.
Economists claim that the nation's labor market has been in a "low hire, low fire" position as companies remain stagnant as a result of uncertainty around Trump's tariffs and the lasting consequences of high interest rates.
Compared to 71,000 in the year that ended in March, employment creation has decreased to an average of 35,000 each month since March. According to Fed Chair Jerome Powell, he believes those figures will be lowered much further.
