The U.S. economy expanded at a 4.3 percent annualized rate in the third quarter of 2025, the fastest pace in two years and a sharp acceleration from the 3.8 percent growth recorded in the second quarter. 

The figure, released on December 23 by the Bureau of Economic Analysis, exceeded economists’ expectations, which had clustered around 3.2 to 3.3 percent, and underscored the economy’s resilience entering the final months of the year.

The release carried unusual timing and weight. 

Because of a government shutdown, the BEA combined what would normally be the advance and second GDP estimates into a single initial report. 

A final revision is scheduled for January 22, 2026. Even with that caveat, the data point to stronger-than-anticipated momentum during the July–September period, reversing concerns raised earlier in the year by a first-quarter contraction.

Consumers and Exports Lead

Consumer spending was the primary driver of the third-quarter expansion, accelerating to a 3.5 percent annualized rate from 2.5 percent in the previous quarter. 

The gains were broad-based, spanning services such as health care and international travel, as well as goods including recreational vehicles and prescription drugs. 

According to the BEA breakdown, higher-income households accounted for a disproportionate share of the increase, highlighting uneven consumption dynamics beneath the headline growth figure.

Exports provided a second major boost, surging 8.8 percent after declining in the second quarter. 

Growth was concentrated in goods exports, particularly capital equipment and pharmaceuticals, adding meaningfully to overall GDP. Government spending also rose, with increases that included higher military expenditures, further supporting headline growth during the quarter.

Not all components moved in the same direction. 

Private investment declined, including a pullback in business fixed investment, partially offsetting gains from consumption and exports. 

Imports also fell, but by less than in the prior quarter; because imports subtract from GDP, the smaller decline reduced their positive contribution to growth.

Other indicators in the report painted a more nuanced picture. 

Current-dollar GDP increased at an 8.2 percent rate, while real gross domestic income rose 2.4 percent. 

Averaging GDP and GDI—a measure often used to smooth volatility—produced a growth rate of 3.4 percent. 

Inflation, as measured by the personal consumption expenditures price index, rose 2.8 percent in the quarter, with core PCE at 2.9 percent, suggesting price pressures remained above the Federal Reserve’s long-run target. 

Corporate profits increased sharply, rising by $166 billion.

The strong third-quarter performance followed a volatile start to the year. 

GDP contracted by 0.6 percent in the first quarter of 2025, partly reflecting a surge in imports ahead of anticipated tariffs, before rebounding to 3.8 percent growth in the second quarter. 

Taken together, growth averaged roughly 2.5 percent annualized over the first three quarters of the year.

Despite the headline strength, underlying conditions point to potential constraints ahead. 

Real disposable income for lower- and middle-income households was flat, and credit card debt continued to rise, signaling more cautious behavior outside higher-income segments. 

The labor market has also softened, with unemployment at 4.6 percent in November. 

Economists expect growth to slow in the fourth quarter, with projections in the 2 to 3 percent range, partly reflecting the economic impact of the government shutdown. 

The Q3 data nonetheless show the U.S. economy entering late 2025 with stronger momentum than many forecasters had anticipated.