Catenaa, Tuesday, December 23, 2025- US economy grew faster than expected in the third quarter by 4.3%, driven by robust consumer spending, but before the rising cost of living and the recent government shutdown.
The Commerce Department’s Bureau of Economic Analysis said in its initial estimate of third-quarter GDP on Tuesday that the Gross Domestic Product increased at a 4.3% annualized rate last quarter, and the economy grew at a 3.8% pace in the second quarter.
Wall Street and analysts had a forecast GDP at a 3.3% pace.
The data was delayed by the 43-day government shutdown and is now outdated. Consumer spending increased at a 3.5% rate last quarter after advancing at a 2.5% pace in the second quarter.
Much of the consumer spending acceleration resulted from a rush to buy electric vehicles before the September 30 expiration of tax credits. Motor vehicle sales dropped in October and November, while spending elsewhere was mixed.
The nonpartisan Congressional Budget Office has estimated the shutdown could slice between 1.0 percentage point and 2.0 percentage points off GDP in the fourth quarter. It projected most of the GDP drop would be recovered, but estimated that between $7 billion and $14 billion would not.
Surveys suggest consumer spending is being driven by higher-income households, thanks to a stock market boom that has inflated household wealth.
In contrast, middle- and lower-income consumers are struggling amid the rising cost of living resulting from President Donald Trump’s sweeping tariffs, economists said, creating what they call a K-shaped economy.
The Federal Reserve this month cut its benchmark overnight interest rate by another 25 basis points to the 3.50%-3.75% range, but signaled borrowing costs were unlikely to fall in the near term as policymakers await clarity on the direction of the labor market and inflation.
