Natalie ShermanBusiness reporter
Bloomberg via Getty Images
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, and marked the strongest growth in two years.
The figures offer a clearer picture of the state of the US economy heading into the end of the year, after data collection had been delayed by the US government shutdown.
The report showed consumer spending rising at an annual rate of 3.5%, compared with 2.5% in the previous quarter, despite a slowing job market and frustration about inflation.
The US economy this year has been buffeted by dramatic changes to trade and immigration policies, as well as cuts to government spending.
But while that has led to sharp swings in some areas, such as imports and exports, the underlying economy has maintained solid momentum, defying expectations.
The latest growth figure was much stronger than expected, with most analysts expecting an annual pace of about 3.2%.
Analysts said the pick-up in consumer spending in the third quarter of the year was driven by more being spent on health care services.
Imports – which count against growth – continued to decline, reflecting the wave of taxes on shipments entering the US that President Donald Trump announced this spring.
Meanwhile exports, which had dropped sharply, bounced back, surging by 7.4%. Government spending also rebounded, driven by defence outlays.
Those gains helped to overcome a slowdown in business investment, including in intellectual property, and a housing market struggling under the weight of still-high interest rates, which have heightened affordability issues and supply constraints.
Michael Pearce, chief US economist at Oxford Economics, said the economy was well positioned as it headed into 2026 as it starts to feel the boost from tax cuts and the US central bank’s recent moves to drop interest rates.
“Underlying measures are consistent with a solid expansion,” he said.
However, analysts warned that rising prices faced by some households may make it difficult to sustain the unusually strong pace of growth seen in the most recent quarter.
Over the three months to September, the Fed’s preferred inflation gauge, the personal consumption expenditures price index, ticked up 2.8%, compared with 2.1% in the previous quarter, according to the report.
Analysts have warned that those price increases are weighing on lower and middle income households, even as higher income households continue to spend freely.
Oliver Allen, senior US economist at Pantheon Macroeconomics, noted that some more recent surveys and credit card data suggest that households are reining in their spending.
“The weak labour market, stagnant real incomes, and exhaustion of pandemic-era excess savings all seem finally to be catching up with households,” he said.
