The US economy picked up strong momentum in the three months to September as consumer spending rose and exports rebounded. Economic output expanded at an annual rate of 4.3%, well above expectations. Growth increased from 3.8% in the previous quarter, marking the fastest pace in two years.
The report followed delays caused by a federal government shutdown. It showed an economy shaped by shifting trade policies, immigration changes, persistent inflation, and reduced public spending. These factors triggered sharp swings in trade activity. Despite the volatility, overall momentum remained strong and surpassed many forecasts.
Economic resilience surprises experts
Aditya Bhave, senior economist at Bank of America, said the economy consistently defied pessimistic predictions since early 2022. He described conditions as highly resilient during an interview on a major international business programme. Bhave said he expected that strength to continue in the coming months.
Many economists had expected slower growth. Forecasts pointed to annual expansion of around 3.2% in the third quarter. The actual results exceeded those projections by a significant margin.
Household spending fuels rebound
Consumer spending provided the largest boost to growth. Household spending rose at a 3.5% annual rate, up from 2.5% in the previous quarter. Spending increased despite signs of a cooling labour market. Households allocated more money toward healthcare services.
Imports continued to decline and reduced their drag on growth. The fall reflected new taxes on goods entering the country announced earlier this year. Exports rebounded sharply after previous weakness, surging 7.4%. Government spending also recovered, led mainly by higher defence outlays.
Investment and housing remain pressured
Strong gains in consumption and trade offset weaker business investment. Companies reduced spending, including investment in intellectual property. The housing market remained under pressure from elevated interest rates. High borrowing costs worsened affordability challenges and tightened 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 continued to signal steady expansion.
Inflation risks temper optimism
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. Analysts questioned whether such rapid growth could continue.
Price pressures rose during the quarter. The preferred inflation measure increased 2.8%, up from 2.1% in the previous quarter. Analysts warned that higher prices weighed heavily on lower and middle income households. Higher income households continued spending freely.
Oliver Allen, senior US economist at Pantheon Macroeconomics, said recent data showed consumers becoming more cautious. Surveys and credit card data suggested slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now constrained households.
