US economy grew at fastest pace in 2 years in third quarter, fueled by consumer spending

The U.S. economy grew at a faster pace than expected in the third quarter, according to the Commerce Department’s estimate.

The Bureau of Economic Analysis (BEA) on Thursday released its final reading of third quarter GDP, which showed the economy grew at an annualized rate of 4.4% in the three-month period including July, August and September. 

That figure topped the expectations of economists polled by LSEG, who had estimated 3.3% GDP growth in the third quarter. It was also the fastest growth rate in two years.

The report also found that real GDP rose at an annualized rate of 3.8% in the second quarter. That followed a GDP contraction of 0.6% in the first quarter. Taken together, those three readings indicate the U.S. economy grew at a 2.5% annualized rate through the first three quarters of 2025.

US ECONOMY EXPECTED TO GROW FASTER IN 2026 DESPITE STAGNANT JOB MARKET: GOLDMAN SACHS

The BEA said the rise in real GDP reflected a rise in consumer spending, exports, government spending and investment. Imports also declined in the third quarter.

“Compared to the second quarter, the acceleration in real GDP in the third quarter reflected upturns in investment, exports, and government spending, as well as an acceleration in consumer spending. Imports decreased less in the third quarter than in the second,” the BEA said.

The report noted that real final sales to private domestic purchasers – which is the sum of consumer spending and gross private fixed investment – rose 2.9% in Q3 after being revised down 0.1 percentage point from the previous estimate.

US CEOS FEAR ECONOMIC UNCERTAINTY MORE THAN THEIR GLOBAL PEERS AS THEY HEAD INTO 2026

Data collection for the report was impacted by the 43-day government shutdown that began on Oct. 1, which caused the BEA to delay its initial estimate for Q3 until Dec. 23 and to forego a second estimate.

EY-Parthenon chief economist Gregory Daco said that the strong GDP reading “was driven by resilient consumer spending, robust equipment and AI-related investment, a sizable boost from net international trade and a rebound in federal government outlays.”

“The U.S. economy is neither overheating nor stalling – it is adjusting” to what Daco called an “unusually intense set of crosscurrents.” 

INFLATION HELD STEADY IN DECEMBER, REMAINING WELL ABOVE THE FED’S 2% TARGET

Those include a significant rise in tariffs along with a notable decline in net migration and surging artificial intelligence (AI) investment. A jobless economic expansion, tax reform and uncertainty over the Federal Reserve’s rate-cutting plans amid elevated inflation and a soft labor market.

Daco said the firm expects that real GDP will rise 3.2% in Q4 2025, along with average GDP growth of 2.3% for 2025 as a whole.