U.S. Economy Grows at Fastest Pace in Years With 4.3% GDP Gain

• The United States (U.S.) economy expanded in the third quarter of 2025 (Q3 2025) at the fastest pace in two years, bolstered by resilient consumer and business spending and calmer trade policies. Inflation-adjusted gross domestic product (GDP), which measures the value of goods and services produced in the U.S., increased at a 4.3% annualised pace, a Bureau of Economic Analysis (BEA) report showed on Tuesday, December 23, 2025. This was higher than all but one forecast in a Bloomberg survey and followed 3.8% growth in the prior period.
• The BEA was originally due to publish an advance estimate of GDP on October 30th; however, the report was cancelled due to the government shutdown. The agency typically releases three estimates of quarterly growth, fine-tuning its projections as more data comes in, but it will only release two for the period leading up to the longest shutdown on record.
• The delayed report shows the economy maintained momentum through the middle of the year as consumers powered ahead and the most punitive of President Donald Trump’s tariffs were rolled back. While the shutdown is expected to weigh on Q4 growth, economists expect a modest rebound in 2026 when households receive tax refunds and an anticipated Supreme Court ruling may strike down Trump’s sweeping global tariffs.
• The Federal Reserve’s latest projections echo that sentiment, with Chair Jerome Powell citing supportive fiscal policy, spending on artificial intelligence (AI) data centres, and continued household consumption as reasons for the central bank’s forecast for faster growth next year. Policymakers are projecting just one interest-rate cut in 2026 after three straight reductions to end this year.
• Part of the reason for some officials’ hesitation to lower borrowing costs much more is that inflation remains above their 2% target. The report showed the Fed’s preferred inflation metric, the personal consumption expenditures price index, excluding food and energy, rose 2.9% in Q3. Further, the BEA has yet to reschedule the October or November monthly PCE data.
• Despite some evidence of softer consumer spending in Q4, “the floor for the economy is still strong,” said Ben Ayers, a senior economist at Nationwide. “We are optimistic that the economy will accelerate in 2026.” That said, data later Tuesday showed that U.S. consumer confidence declined for a fifth consecutive month in December, matching the longest streak since 2008 and reflecting ongoing concerns about inflation, tariffs and politics.

(Source: Bloomberg)