The United States economy expanded at a much faster pace than expected in the third quarter, underpinned by resilient consumer spending, according to a delayed government report released on Tuesday (Wednesday AEDT).
Gross domestic product, which measures the total value of goods and services produced across the U.S. economy, rose at an annualised rate of 4.3% in the July–September period, the Commerce Department said in its initial reading of third-quarter growth.
This compared with economists’ expectations for a 3.3% increase.
Household demand was a key driver of the stronger-than-anticipated outcome. Consumer spending rose 3.5% in the third quarter, accelerating from a 2.5% increase in the previous quarter.
Growth was also supported by higher exports and increased government spending, while a smaller decline in private fixed investment provided an additional lift.
The release had originally been scheduled for 30 October but was postponed due to the federal government shutdown.
The Commerce Department said: “Due to the recent government shutdown, this initial report for the third quarter of 2025 replaces the release of the advance estimate originally scheduled for October 30 and the second estimate originally scheduled for November 26.”
A closely watched gauge of underlying demand, real final sales to private domestic purchasers, rose 3% in the quarter, up 0.1 percentage point from the prior period.
Federal Reserve officials monitor this measure closely as an indicator of consumer-driven momentum in the economy.
Despite the robust growth figures, inflation pressures remained elevated. The personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, increased 2.8% over the quarter, while the core index, which excludes food and energy, rose 2.9%.
Both readings were higher than their previous levels of 2.1% and 2.6% respectively and remain above the Fed’s 2% target. Meanwhile, the chain-weighted price index rose 3.8%, a full percentage point above forecasts, reflecting higher prices even after accounting for changes in consumer behaviour.
Corporate America also saw a sharp improvement in profitability. Corporate profits surged by $166.1 billion, or 4.2%, in the third quarter, following a modest $6.8 billion increase in the prior quarter.
Market reaction to the data was muted, with investors viewing the report as largely backward-looking.
Meanwhile, in a separate report, signs emerged that consumer sentiment may be cooling. The Conference Board said its consumer confidence index fell 3.8 points in December to 89.1, below market expectations of 91.0.
The decline points to growing anxiety around jobs and income and is consistent with economists’ expectations for a moderation in consumer spending after its strong third-quarter performance.
The Conference Board noted in the release: “This includes an upward revision to November’s reading, as responses collected after the end of the federal government shutdown (which spanned October 1 to November 12) were more positive than those collected during the impasse.”
Dana M Peterson, Chief Economist at The Conference Board, said, “Despite an upward revision in November related to the end of the shutdown, consumer confidence fell again in December and remained well below this year’s January peak. Four of five components of the overall index fell, while one was at a level signalling notable weakness.”
Peterson added that inflation-related concerns continue to dominate household sentiment, saying: “Consumers' write-in responses on factors affecting the economy continued to be led by references to prices and inflation, tariffs and trade, and politics.”
“However, December saw increases in mentions of immigration, war, and topics related to personal finances—including interest rates, taxes and income, banks and insurance.”
