US economy grew 4.3% in the third quarter of 2025, a much stronger pace than analysts expected and faster than the 3.8% expansion in the second quarter. The growth rate, reported by the Commerce Department after a delayed release due to the government shutdown has even beaten economists’ forecasts of around 3%–3.2%.
The increase was driven by strong consumer spending, higher exports, increased government expenditures, and a smaller drop in private investment, even though inflation remained above the Federal Reserve’s 2% target. The report also showed consumer spending rose by 3.5%, exports surged, and imports declined, helping push overall economic output higher. Here are some of the key reasons behind the strong surge:
Strong consumer spending
One of the biggest reasons for the economy’s growth was the strong spending by consumers. Consumer spending, which makes up about 70% of the US economy, rose by 3.5% from July to September. This was an increase from the 2.5% growth seen in the previous quarter (April to June). People continued to buy goods and services, helping keep the economy humming along.
“If the economy keeps producing at this level, then there isn’t as much need to worry about a slowing economy,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management to AP, adding that inflation could return as the greatest concern about the economy.
Increase in export rate
Exports, or goods and services sold to other countries, also played a role in the economy’s growth. Exports grew at a strong 8.8% rate, which helped the overall economy. At the same time, government spending increased, adding more fuel to the economic engine. Both these factors pushed the economy’s growth beyond what analysts expected.
Small drop in private investment
Private fixed investment, which refers to businesses spending on buildings, equipment, and technology, took a small dip in the third quarter. However, the drop was not as big as many had feared, so it didn’t hurt the economy as much as expected. Even though the economy grew at a fast rate, inflation remained a concern.
The Federal Reserve, which controls US interest rates, aims to keep inflation around 2%. But in the third quarter, inflation, as measured by the Personal Consumption Expenditures (PCE) price index, increased to 2.8%, up from 2.1% in the second quarter. When we exclude food and energy prices, core inflation rose to 2.9%, up from 2.6% in the previous quarter. This means that, while the economy is growing, prices are still rising faster than the Fed would like.
The Federal Reserve’s actions to fight inflation by raising interest rates are likely to have some impact on future growth. However, economists remain optimistic that the economy will keep expanding, even if at a slower pace. This growth is also happening in the context of a changing job market. The unemployment rate ticked up to 4.6% in November, and job growth has slowed since earlier in the year. But overall, the economy remains resilient.