Key Points
- The U.S. economy grew at a 4.3% annual rate in the third quarter of 2025. This is the fastest growth rate in two years.
- The growth was driven by strong consumer spending and a rebound in exports.
- This is a healthier foundation than the second quarter, which was boosted by falling imports.
- Inflation ticked up slightly, which could be a concern for the Federal Reserve.
The U.S. economy grew at a blistering 4.3% annual rate in the third quarter of 2025, the fastest pace we’ve seen in two years. This is a big jump from the 3.8% growth we saw in the second quarter, but the headline number doesn’t tell the whole story. A deeper dive into the data shows that the recent growth is built on a much healthier and more sustainable foundation than what we saw earlier in the year.
The big difference is what’s driving the growth. In the second quarter, much of the positive number came from a decline in imports.
Since imports are subtracted from GDP calculations, a large drop can make the economy appear stronger than it really is. It doesn’t necessarily mean people are buying more or businesses are investing. In fact, investment and exports actually fell during that period.
The third quarter was markedly different. This time, the growth was driven by real economic activity. Consumer spending increased, exports rebounded, and government spending increased. While imports did fall again, they played a much smaller role in the overall picture. This is evidence that the domestic economy is genuinely strong, not merely benefiting from a statistical quirk.
One of the best signs of this strength is the jump in what economists call “real final sales to private domestic purchasers.” This number, which measures how much Americans are spending and businesses are investing, rose 3% in the third quarter. This indicates that domestic demand is robust, which is a positive sign for the future.
The only real downside in the report was a slight increase in inflation. The personal consumption expenditures price index, a key measure of inflation, rose 2.8% in the third quarter. This is up from 2.1% in the second quarter, which could be a concern for the Federal Reserve.
Still, the overall report is a strong signal that the U.S. economy is on a solid footing as we head into 2026.
