The US economy picked up speed over the three months to September, as consumer spending jumped and exports increased.
The world's largest economy expanded at an annual rate of 4.3%, up from 3.8% in the previous quarter. That was better than expected, marking the strongest growth in two years.
A recent report, delayed due to the US government shutdown, sheds light on an economy impacted by trade and immigration policy changes, persistent inflation, and government spending cuts. Although these factors caused fluctuations in imports and exports, many sectors continued to show solid performance, exceeding numerous forecasts.
“This is an economy that has defied doom and gloom expectations basically since the beginning of 2022,” remarked Aditya Bhave, senior economist at Bank of America, characterizing the economic landscape as very very resilient.
Consumer spending significantly contributed to the overall growth figure, rising at an annual rate of 3.5%, boosted by increased health care expenditures. Conversely, imports continued their decline, influenced by the taxes imposed on incoming shipments following changes implemented earlier in the year. A notable rebound in exports—up 7.4%—and rising government defense spending further supplemented the economy's upward trajectory.
Despite these positive indicators, a slowdown in business investment and challenges in the housing market due to high-interest rates add caution to future predictions. Michael Pearce, chief US economist at Oxford Economics, shared that the economy is well-positioned heading into 2026, benefitting from tax reductions and recent interest rate cuts.
However, concerns linger for lower- and middle-income households facing rising costs, which could hinder sustained growth. The Federal Reserve's preferred inflation metric rose to 2.8% this quarter, underscoring these challenges. Analysts note a potential shift in household spending trends as the economic impacts of the pandemic era draw to a close.
