WASHINGTON (AP) – The U.S. economy grew at a surprisingly strong annual rate of 4.3% in the third quarter, marking the fastest expansion in two years, reflecting the government and its policies. consumption expenditureexports all increased as well.
The Commerce Department said Tuesday that U.S. gross domestic product, the economy-wide output of goods and services, rose from 3.8% growth in the April to June period from July to September. government shutdown. Analysts expect growth to be 3% over the same period, according to data firm FactSet.
but, inflation That’s still above the Fed’s desired level. The Fed’s preferred inflation measure, called the Personal Consumption Expenditure Index (PCE), rose at an annualized rate of 2.8% last quarter, up from 2.1% in the second quarter.
So-called core PCE inflation, which excludes volatile food and energy prices, was 2.9%, up from 2.6% in the April-June period.
Economists say sustained and potentially worsening inflation could make it less likely that the Fed will cut interest rates in January, even as central bank officials remain concerned about a slowing labor market.
“If the economy continues to produce at this level, we don’t have to worry too much about a slowdown,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, adding that the biggest concern for the economy is that inflation could return.
In a quiet holiday trading week, U.S. markets on Wall Street turned lower on the GDP report, likely due to growing doubts that the Federal Reserve will cut interest rates further next month.
Consumer spending, which accounts for about 70% of U.S. economic activity, rose at an annual rate of 3.5% last quarter from 2.5% in the April-June period.
Government consumption and investment rose 2.2% in the quarter, after falling 0.1% in the second quarter. The third-quarter numbers were driven by increased spending at the state and local level and federal defense spending.
Private capital investment decreased by 0.3%, driven by a decline in investment in non-residential buildings such as housing, offices and warehouses. However, the decline was much smaller than the 13.8% decline in the second quarter.
The sector of GDP data that measures the economic strength grew at an annual rate of 3% from July to September, slightly up from 2.9% in the second quarter. This category includes personal consumption and private investment, but excludes volatile items such as exports, inventories, and government spending.
Exports increased by 8.8%, but imports, which are subtracted from GDP, fell by a further 4.7%.
Tuesday’s report is the first of three forecasts the government will make for GDP growth in the third quarter of this year.
The U.S. economy has continued to expand at a healthy rate, with the exception of the first quarter, when the economy shrank for the first time in three years as companies rushed to import goods ahead of President Donald Trump’s tariffs. nevertheless much higher borrowing rates The Fed imposed the policy in 2022 and 2023 to rein in inflation, which soared as the U.S. rebounded with unexpected strength from the brief but devastating coronavirus recession of 2020.
Inflation remains above the Fed’s 2% target, but the central bank cut its benchmark lending rate for the third time in a row to end 2025, largely due to concerns about the job market, which has steadily lost momentum since the spring.
Last week, the government announced that the U.S. economy gained a healthy 64,000 jobs It declined in November, but lost 105,000 people in October. Notably, the unemployment rate rose to 4.6% last month, the highest since 2021.
Economists say the country’s labor market is experiencing “fewer jobs and fewer layoffs” as businesses endure the effects of uncertainty over the Trump administration’s tariffs and the lingering effects of rising interest rates. Since March, job creation has fallen to an average of 35,000 per month, compared with 71,000 in the year that ended in March. Federal Reserve Chairman Jerome Powell said he expected this figure to be revised downward further.
