The US economy gained momentum in the three months to September as consumer spending rose and exports rebounded. Economic output expanded at an annual rate of 4.3%, well above expectations. Growth increased from 3.8% in the previous quarter, marking its fastest pace in two years.
The report followed delays caused by a federal government shutdown. It highlighted an economy shaped by shifting trade policies, immigration changes, persistent inflation, and reduced public spending. These factors triggered sharp swings in trade activity. Despite that volatility, overall momentum remained strong and exceeded many forecasts.
Economic resilience surprises analysts
Aditya Bhave, senior economist at Bank of America, said the economy repeatedly defied pessimistic predictions since early 2022. He described conditions as highly resilient during an interview on a major international business programme. Bhave said he expected that strength to continue in the coming months.
Most economists had predicted weaker growth. Forecasts pointed to annual expansion of around 3.2% in the third quarter. The actual results surpassed those projections by a wide margin.
Consumer spending leads the rebound
Household spending provided the largest contribution to growth. Consumer spending rose at a 3.5% annual rate, up from 2.5% in the previous quarter. Spending increased even as the labour market showed signs of slowing. Households allocated more funds to healthcare services.
Imports continued to decline and reduced their drag on growth. The drop reflected new taxes on goods entering the country announced earlier this year. Exports rebounded sharply after previous weakness, surging 7.4%. Government spending also recovered, driven mainly by higher defence outlays.
Investment and housing remain pressured
Strong gains in consumption and trade offset slower business investment. Companies reduced spending, including investment in intellectual property. The housing market remained under pressure from elevated interest rates. High borrowing costs worsened affordability challenges and tightened 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 continued to signal steady expansion.
Inflation casts a shadow
Donald Trump praised the figures on social media and credited tariffs for the strong performance. He faced criticism as consumer confidence weakened and opinion polls showed dissatisfaction with his economic leadership. Analysts questioned whether such rapid growth could persist.
Price pressures rose during the quarter. The preferred inflation measure increased 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 spending freely.
Oliver Allen, senior US economist at Pantheon Macroeconomics, said recent data showed consumers becoming more cautious. Surveys and credit card data suggested slower spending. Allen said weak labour conditions, stagnant real incomes, and depleted pandemic savings now constrained households.
