US economy grows at fastest pace in two years as consumer spending surges

"The US economy expanded at its fastest rate in two years during the third quarter of 2025, buoyed by a powerful rebound in consumer spending that more than offset weaker investment growth. Gross domestic product grew at an annualised rate of 4.3 per cent between July and September, according to revised figures from the US Bureau of Economic Analysis. The updated estimate was lifted from an initial 3.8 per cent reading and came in well above economists' expectations of around 3.3 per cent growth."

"The figures underline the continued resilience of the world's largest economy, which has significantly outperformed its G7 peers over the past year. By comparison, the UK posted annualised growth of just 0.4 per cent in the same period, while the eurozone expanded by roughly 1.2 per cent. Household spending was the dominant driver of growth, contributing more than two percentage points to overall GDP expansion."

"Americans continued to spend robustly on services and discretionary items, helping to offset headwinds elsewhere in the economy. Government spending also provided a boost, while exports contributed positively as imports fell back following the introduction of tariffs earlier in the year. Investment, however, was a mild drag on growth. While spending on artificial intelligence infrastructure remains elevated, the pace of expansion has slowed compared with earlier quarters, reducing its overall contribution to GDP."

US gross domestic product expanded at an annualised 4.3 per cent in the third quarter of 2025, revised up from an initial 3.8 per cent and well above economists' forecasts near 3.3 per cent. The pace marks the strongest quarterly performance since the third quarter of 2023 and an acceleration from the previous quarter. Household spending was the dominant driver, contributing more than two percentage points, supported by robust services and discretionary purchases. Government spending and a positive contribution from exports aided growth as imports fell after new tariffs. Investment was a mild drag as AI infrastructure spending remains elevated but has slowed. The Federal Reserve cut interest rates three times in 2025; robust GDP complicates the monetary outlook.

Read at Business Matters