The US economy gained strong momentum in the three months to September as consumers increased spending and exports rebounded. Economic output expanded at an annual rate of 4.3%, exceeding expectations. Growth improved from 3.8% in the previous quarter and marked the fastest pace in two years.
The long-delayed report followed a federal government shutdown. It highlighted an economy shaped by trade shifts, immigration changes, persistent inflation, and reduced public spending. These pressures triggered sharp swings in trade activity. Despite the volatility, the broader economy maintained solid momentum and exceeded many forecasts.
Resilience under pressure
Aditya Bhave, senior economist at Bank of America, said the economy consistently defied pessimistic predictions since early 2022. He described current conditions as highly resilient during an interview on an international business news programme. Bhave said he saw no clear reason for that strength to fade in the near future.
Most analysts had expected weaker performance. Forecasts pointed to annual growth near 3.2% for the third quarter. Actual results surpassed those projections by a wide margin.
Consumer spending fuels expansion
Household spending provided a major boost to growth. Consumer spending rose at a 3.5% annual rate, up from 2.5% previously. Spending increased even as the labour market showed signs of cooling. Households devoted more money to healthcare services.
Imports continued to decline and reduced their drag on overall growth. The drop reflected new taxes on goods entering the country announced earlier this year. Exports rebounded sharply after previous weakness and surged 7.4%. Government spending also recovered, driven mainly by higher defence expenditure.
Investment and housing lag behind
Gains in consumption and trade offset slower business investment. Companies reduced spending, including investment in intellectual property. The housing market also remained under pressure from elevated interest rates. High borrowing costs worsened affordability and intensified supply constraints.
Michael Pearce, chief US economist at Oxford Economics, said the economy entered 2026 from a position of strength. He said tax cuts and recent interest rate reductions should support activity. Pearce added that underlying indicators pointed to a steady and durable expansion.
Inflation threatens sustainability
Donald Trump welcomed the figures on social media and said tariffs drove the strong performance. He faced criticism amid weakening consumer confidence and opinion polls showing dissatisfaction with his economic record. Several analysts questioned whether such rapid growth could continue.
Price pressures increased during the quarter. The preferred inflation measure rose 2.8%, up from 2.1% in the previous quarter. Analysts warned that higher prices weighed heavily on lower and middle income households. Higher income households continued to spend more freely.
Oliver Allen, senior US economist at Pantheon Macroeconomics, said recent data showed consumers growing cautious. Surveys and credit card figures pointed to slower spending. Allen said weak employment conditions, flat real incomes, and depleted pandemic savings now constrained households.
