The US economy has surged at a remarkable pace, expanding at an annual rate of 4.3% in the third quarter of 2025, marking the strongest growth in two years. This impressive figure, which exceeded most analysts’ forecasts, underscores the resilience of the world’s largest economy despite the turbulent changes in trade and immigration policies, as well as persistent inflation and government spending cuts.
Driving this robust performance was a surge in consumer spending, which rose at an annual rate of 3.5%, up from 2.5% in the previous quarter. Households spent more on healthcare services, offsetting a slowdown in the job market. Additionally, exports bounced back strongly, increasing by 7.4%, while imports, which count against growth, continued to decline, reflecting the impact of the tariffs imposed by the Trump administration earlier this year.
Government spending also rebounded, fueled by increased defence outlays, helping to offset a slowdown in business investment, including in intellectual property, and a struggling housing market grappling with high interest rates and affordability issues.
Aditya Bhave, a senior economist at Bank of America, described the economy as “very, very resilient,” stating, “I don’t see why that wouldn’t continue going forward.” This optimism is shared by Michael Pearce, chief US economist at Oxford Economics, who believes the economy is well-positioned as it heads into 2026, with the benefits of tax cuts and the Federal Reserve’s recent interest rate cuts yet to be fully realized.
However, not all analysts are entirely sanguine about the outlook. Some have warned that the rising prices faced by some households could make it difficult to sustain the unusually strong pace of growth seen in the most recent quarter. The personal consumption expenditure price index, the Fed’s preferred inflation gauge, ticked up to 2.8% in the third quarter, compared to 2.1% in the previous quarter, indicating that lower and middle-income households are feeling the pinch, even as higher-income households continue to spend freely.
Oliver Allen, a senior US economist at Pantheon Macroeconomics, noted that some more recent survey and credit card data suggest that households are reining in their spending, as the weak labour market, stagnant real incomes, and the exhaustion of pandemic-era excess savings begin to take their toll.
Despite these cautionary notes, the overall picture remains one of a resilient US economy that has defied the “doom and gloom” expectations that have persisted since the beginning of 2022. As the country looks ahead to 2026, the stage appears set for continued growth, provided that the challenges of inflation and affordability can be effectively managed.
