The actual GDP of the United States grew significantly by 4.3% in the third quarter, marking the fastest growth rate in two years, primarily due to strong household consumption expenditure. The data release process was shortened due to the impact of the government shutdown. Although core inflation remains high at 2.9%, the easing expectations regarding tariff policies have made the market optimistic. The Federal Reserve may slow down the pace of interest rate cuts next year due to an overheating economy.
Benefiting from robust consumer and business spending as well as a more stable trade policy, the U.S. economy exhibited its fastest expansion pace in two years during the third quarter.
On the 23rd, preliminary data released by the U.S. Bureau of Economic Analysis (BEA) showed:
The annualized quarterly growth rate of U.S. real GDP for Q3 was 4.3%, compared to an expected 3.3% and a previous value of 3.8%;
The annualized quarterly growth rate of the U.S. core Personal Consumption Expenditures (PCE) price index for Q3 was 2.9%, matching expectations of 2.9% and up from the prior reading of 2.6%.
The release of this data occurred under unique circumstances. The initial GDP estimate, originally scheduled for October 30, was canceled due to a government shutdown, which set a record as the longest in history. As a result, the data publication process was adjusted. Typically, the BEA releases three rounds of quarterly growth estimates and refines projections as additional data becomes available. However, for this period affected by the shutdown, the agency will deviate from its usual practice by issuing only two rounds of estimates.
Following the data release, the U.S. dollar index surged approximately 10 points, currently trading at 97.99. U.S. stock futures experienced minimal short-term fluctuations, with Nasdaq 100 futures maintaining a decline of around 0.15%. The yield on the 10-year U.S. Treasury note briefly spiked, now at 4.149%. Spot gold dropped about $4 in the short term, currently quoted at $4,485.51 per ounce.
Consumer Spending Drives Economic Growth
Detailed data from this report shows that consumer spending, the largest pillar of the U.S. economy, performed exceptionally well in the third quarter, growing by 3.5%, significantly higher than the 2.5% recorded in the second quarter. This indicates that despite pressures from borrowing costs, U.S. households maintained strong consumption intentions, directly propelling the acceleration of overall economic expansion.
In contrast, investment performance was mixed. Although non-residential investment continued to grow, its pace slowed from 7.3% in the previous quarter to 2.8%. Residential investment continued to weigh on the economy, declining by 5.1% in the third quarter, unchanged from the drop seen in the second quarter.
Meanwhile, gross domestic income (GDI), a measure of production-side earnings, grew by 2.4%, down from 3.8% in the previous quarter.
Policy Interventions and Future Outlook
This delayed economic "report card" revealed that the economy maintained its growth momentum amid the rollback of Trump's tariff policies. Due to a record-long government shutdown, the BEA canceled the preliminary GDP estimate originally scheduled for release at the end of October. Typically, the agency releases three quarterly growth estimates, refining them as data becomes available, but due to the shutdown, only two estimates will be issued this quarter.
Although economists anticipate that the government shutdown will weigh on fourth-quarter growth, markets remain cautiously optimistic about the outlook for 2026. Analysts predict that the economy could see a modest rebound next year as households receive tax refunds and the Supreme Court is expected to issue a ruling overturning Trump's broad global tariff policies.
The Federal Reserve Maintains a Cautious Stance
Strong economic data aligns with the Federal Reserve's latest projections. Fed Chair Powell noted that supportive fiscal policies, spending on AI data centers, and sustained household consumption are key factors behind the central bank's forecast of accelerated growth next year.
However, some officials have shown hesitation about further significant reductions in borrowing costs, primarily because inflation remains above the Fed's 2% target. The report shows that the Fed's preferred inflation gauge—the core Personal Consumption Expenditures (PCE) price index, which excludes food and energy—rose by 2.9% in the third quarter.
Affected by the shutdown, the BEA has yet to reschedule the release of monthly PCE data for October and November. Based on the current inflation and growth trends, policymakers now expect only one rate cut in 2026, following three consecutive cuts before the end of this year.
Editor/jayden