Economy Grows By 4.3% In Third Quarter, Strongly Beating Forecasts (UPDATED)

Editor’s Note: This story has been updated to include additional U.S. economic data for the third quarter of 2025.

The U.S. economy continued to show an exceptional resilience in the third quarter.

Gross domestic product (GDP) expanded at an annualized 4.3% rate in the July-to-September period, according to the initial estimate released Tuesday by the Bureau of Economic Analysis.

The figure marks a modest acceleration from the 3.8% growth pace recorded in the second quarter, and came in sharply above estimates of 3.3%. The expansion marked the strongest pace of economic growth since the third quarter of 2023.

Yet inflation pressures also increased. Personal Consumption Expenditure (PCE) prices rose by an annualized 2.8% rate in the third quarter, accelerating from the previous 2.1%. PCE prices excluding food and energy rose by 2.9% on the quarter, up from 2.6%.

US Q3 GDP: Key Highlights

Growth in the third quarter was driven by stronger consumer spending, exports, and government outlays, which more than offset a decline in investment.

Consumer spending increased on gains in both services and goods. Within services, growth was led by health care and other services. Health care spending rose due to higher outlays for outpatient care, hospital, and nursing home services.

Within goods, the most significant contributors were recreational goods, vehicles, and other nondurable goods. Spending on recreational goods and vehicles was driven mainly by higher purchases of information processing equipment, based on Monthly Retail Trade Survey data. The increase in other nondurable goods largely reflected higher spending on prescription drugs.

Goods exports were led by capital goods excluding automotive products and nondurable consumer goods, while other business services, including professional and management consulting, drove services exports.

Imports declined overall, as a decrease in goods, led by nondurable consumer goods, more than offset an increase in services, which was driven by other business services.

Government spending rose on higher outlays at both the state and local levels, led by consumption expenditures, and at the federal level, driven primarily by defense consumption. The decline in investment reflected a reduction in private inventory investment, led by wholesale trade and manufacturing.

Traders Trim Expectations For Fed Rate Cuts

Stronger-than-expected economic growth prompted traders to scale back bets on a near-term Federal Reserve rate cut, as firm activity and rising inflation pressures reinforced expectations that interest rates will remain unchanged at the January meeting.

The probability of a 25-basis-point rate cut fell to 15%, down from 20% a day earlier, minutes after the data release, according to CME Group FedWatch.

Equity futures reacted negatively. S&P 500 futures slipped about 20 points from around 6,872, while Nasdaq 100 futures fell roughly 40 points from near 25,440.

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Originally Posted December 23, 2025 – Economy Grows By 4.3% In Third Quarter, Strongly Beating Forecasts (UPDATED)