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US GDP surges to two-year high
The United States economy expanded at an annual rate of 4.3% between July and September, outpacing forecasts and marking the strongest quarterly growth in two years, according to official data released on Tuesday.
Consumer spending drives rebound
Household expenditures rose at an annualized 3.5%, up from 2.5% in the previous quarter, despite a cooling labor market and persistent inflation concerns. Analysts attributed much of the increase to higher spending on healthcare services.
Trade and defense boost growth
Exports rebounded sharply, climbing 7.4% after a steep decline earlier in the year. Meanwhile, imports continued to fall, reflecting the impact of tariffs imposed by the Trump administration. Federal defense spending also rose, helping offset a slowdown in business investment and a sluggish housing market.
Inflation concerns linger
The Federal Reserve's preferred inflation measure, the personal consumption expenditures price index, increased to 2.8% in the third quarter, up from 2.1% in the prior period. Economists warn that rising costs may strain lower- and middle-income households, potentially curbing future spending.
"Underlying measures are consistent with a solid expansion," said Michael Pearce, chief US economist at Oxford Economics. "The economy is well positioned heading into 2026 as tax cuts and recent interest rate reductions begin to take effect."
Michael Pearce, Oxford Economics
Challenges ahead
Despite the strong quarter, analysts caution that weakening job growth, stagnant real wages, and dwindling pandemic-era savings could dampen consumer activity in the coming months. Recent credit card data and surveys suggest households are already tightening their belts.
"The weak labor market, stagnant real incomes, and exhaustion of pandemic-era excess savings all seem finally to be catching up with households," noted Oliver Allen, senior US economist at Pantheon Macroeconomics.
Oliver Allen, Pantheon Macroeconomics
Policy shifts and economic resilience
The US economy has weathered significant policy changes this year, including trade restrictions, immigration reforms, and reduced government spending. While these shifts have caused volatility in imports and exports, the broader economy has maintained steady momentum, defying earlier projections of a slowdown.
