The US economy posted its strongest quarterly growth in two years during Q3, driven by resilient consumer and business spending alongside stabilizing trade policies.
According to a Tuesday report from the Bureau of Economic Analysis (BEA), inflation-adjusted GDP expanded at an annualized rate of 4.3%—exceeding all but one economist’s forecast in a Bloomberg survey and outpacing Q2’s 3.8% growth.
Originally scheduled for October 30, the preliminary GDP estimate was canceled due to the government shutdown. The BEA typically issues three quarterly GDP revisions as more data becomes available, but for this period preceding the historic shutdown, only two estimates will be released.
Key Indicators (Quarterly SAAR) | Latest | Q2 GDP | +4.3% | +3.8% GDI | +2.4% | +2.6% Consumer Spending | +3.5% | +2.5% Residential Investment | -5.1% | -5.1% Nonresidential Investment | +2.8% | +7.3%
The delayed report underscores sustained economic momentum mid-year, fueled by robust consumer activity and the rollback of some of former President Trump’s toughest tariffs. While the shutdown may weigh on Q4 growth, economists anticipate a modest 2026 rebound as households receive tax refunds and potential Supreme Court action could nullify global tariffs.
The Federal Reserve’s latest projections align with this outlook. Chair Jerome Powell cited supportive fiscal policy, AI-driven data center investments, and steady household spending as factors behind upgraded 2026 growth forecasts. After three consecutive 2025 rate cuts, policymakers now expect just one more reduction next year.
Some Fed officials remain cautious about aggressive further easing, partly due to inflation lingering above the 2% target. The GDP report showed the Fed’s preferred inflation gauge—core PCE—rose 2.9% in Q3. The BEA has yet to reschedule October and November PCE releases.
**Demand Dynamics** Consumer spending, the economy’s primary engine, grew at a 3.5% annualized rate, reflecting solid services expenditures (including healthcare and international travel) offset by weaker auto outlays. However, a softening labor market and high living costs may challenge consumers in 2026, exacerbating spending disparities across income groups.
Business investment advanced 2.8%, propelled by renewed strength in computer equipment purchases and record data center spending.
The final Q3 GDP revision will be published on January 22. The BEA has not announced new dates for Q4 and full-year 2025 GDP estimates, originally slated for January 29, citing insufficient data availability due to the shutdown.
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