The US economy expanded at an annual pace of 4.3 per cent in the third quarter of 2025, the fastest rate in two years, driven by a surge in consumer spending.
The estimate of activity in the world’s largest economy was revised up from 3.8 per cent to 4.3 per cent, exceeding Wall Street economists’ forecasts of GDP growth of 3.3 per cent. It is the best performance since the third quarter of 2023 and outpaced the 3.8 per cent in the previous quarter, according to figures from the US Bureau of Economic Analysis.
The figures underscore the strength of the US economy this year, which has far outpaced the rest of the G7 thanks to resilient consumers and big spending on AI infrastructure from a handful of large technology companies. Posting on Truth Social, President Trump wrote: “The Trump Economic Golden Age is FULL steam ahead. You haven’t seen anything yet!”
By comparison, the UK recorded an annualised growth rate of 0.4 per cent in the third quarter, and output was about 1.2 per cent higher in the eurozone over the same period. The US economy recorded a surprise contraction at the start of the year when companies stocked up on imported goods before April’s tariff announcements.
American household spending accounted for more than 2 per cent of the annualised growth in the three months to September, while exports made up just under 1 per cent and imports decreased after the imposition of goods tariffs on the rest of the world. Government spending also boosted the economy in the quarter, while total investment had a small negative impact, the bureau said.
The booming economy is likely to push some officials at the Federal Reserve, the US central bank, into voting to keep interest rates stable in 2026, rather than loosening monetary policy in the face of pressure from the White House. The Fed cut interest rates three times this year but has said its future decisions will be subject to more uncertainty as it balances the prospect of rising inflation with a slowing labour market.
Any intransigence is likely to provoke fresh pressure from the president, who on Tuesday said he wanted the next chairman of the Fed to lower interest rates if the markets are doing well, adding that “anybody that disagrees with me will never be the Fed Chairman”.
Official figures showed a rise in US inflation, as measured by the personal consumption expenditure index, to 2.8 per cent in the third quarter from 2.1 per cent. Core inflation, which takes out energy costs, jumped from 2.6 per cent to 2.9 per cent. The Fed targets a core personal consumption expenditure rate of about 2 per cent a year.
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Traders expect one more interest rate cut of 0.25 percentage points in the first half of 2026, in March, to take borrowing costs to 3.25-3.5 per cent. The economy is expected to slow in the final quarter when the federal government was shutdown for more than a month. Separate consumer confidence figures showed household sentient was at its joint lowest in five years.
Wall Street opened higher, with stocks on the S&P 500, Dow Jones, and Nasdaq up less than 1 per cent. US government bond prices dipped after the GDP figures were released, reflecting expectations for fewer interest rate cuts next year. The yield on US two-year treasury bonds, which are sensitive to a changing monetary policy outlook, rose by 0.03 percentage points to 3.54 per cent.
The dollar weakened by 0.2 per cent against a basket of major currencies and lost 0.33 per cent against the pound to $1.35. The US currency has slipped to its weakest level in three months this week.
Gold, which has been one of the biggest beneficiaries of money flowing out of the dollar, rose another 1.2 per cent on Tuesday to hit a fresh record of $4,406 per ounce.