By Andrew Moran

Robust consumer spending and a rebound in exports have helped the U.S. economy grow faster than economists expected, according to delayed Bureau of Economic Analysis data released on Dec. 23.

Real gross domestic product (GDP) expanded at a rate of 4.3 percent in the third quarter, up from 3.8 percent in the second quarter.

Ahead of the official government release, the Federal Reserve Bank of Atlanta’s closely watched GDPNow model had projected 3.5 percent growth for the July–September period. The market consensus was 3.3 percent.

President Donald Trump touted the solid data, attributing growth to tariffs.

“The tariffs are responsible for the great USA economic numbers just announced … and they will only get better!” he said in a post on Truth Social shortly after the GDP report was released. “Also, no inflation & great national security. Pray for the U.S. Supreme Court!”

The solid July–September performance was reflected in sizable gains in consumer spending (3.5 percent) and exports (8.8 percent), both marking notable accelerations from the second quarter.

Government consumption also rebounded in the third quarter, rising by 2.2 percent following two consecutive quarters of contraction.

This partly offset the tepid 0.3 percent drop in gross private domestic investment. Imports, which subtract from gross domestic product calculations, also fell by 4.7 percent.

Trade has contributed to the volatility observed in the GDP data. In the first three months of 2025, the economy contracted as companies rushed to front-run the administration’s tariffs and bolster their purchases of foreign goods. Since then, trade conditions have stabilized as businesses adapt to the evolving tariff landscape.

On the inflation front, price pressures were elevated, the government said.

Personal consumption expenditure inflation climbed to 2.8 percent from 2.1 percent. Core personal consumption expenditure inflation, which removes food and energy, ticked up to 2.9 percent from 2.6 percent.

Both readings matched economists’ expectations.

The latest GDP report signals that the U.S. economy has momentum, despite concerns about a cooling labor market.

Looking at Q4 and Beyond

Although 2025 has been a turbulent year buffeted by trade uncertainty and the record-breaking government shutdown, the U.S. economy is still growing.

The fourth quarter is expected to grow by about 2 percent, according to various forecasts.

U.S. officials have warned that Washington’s spending impasse will likely hit growth prospects in the October–December period.

In October, the nonpartisan Congressional Budget Office projected that a six-week shutdown would cost the economy $11 billion.

Still, Treasury Secretary Scott Bessent said he expects the United States to finish the year with a 3 percent expansion.

“The economy has been better than we thought,” Bessent said in an interview with CBS News’s “Face the Nation” earlier in December. “We’ve had 4 percent GDP growth in a couple of quarters.”

“We’re going to finish the year, despite the Schumer shutdown, with 3 percent real GDP growth,” he said, referring to Sen. Chuck Schumer (D-N.Y.).

Looking ahead to the new year, BMO chief U.S. economist Scott Anderson said he expects much of the lost activity during the shutdown to return in the first quarter of 2026.

Real GDP growth could reaccelerate to 2.1 percent by the end of next year, he said.

“The risks around the outlook appear well balanced,” he said in a Dec. 12 note.

“On the upside, the possibility of lower tariffs, strong productivity gains, resilient consumer spending, and more Fed rate cuts. On the downside, a possible equity market pull-back, lingering inflation pressures, and a currently weak labor market leads the list of concerns.”

Most of Trump’s tariffs have been implemented, and levies could be reduced if the White House negotiates new trade agreements.

The Federal Reserve ended 2025 with three quarter-point interest rate cuts. The central bank has penciled in a single rate reduction in 2026, although the futures market is betting on two to three quarter-point cuts.

Wall Street kicked off 2025 on a post-election high, experienced a springtime sell-off, recovered by the summer, and embarked upon all-time highs. Heading into 2026, investors will enjoy the easing of monetary policy and grapple with whether artificial intelligence is in a bubble.

Ultimately, many economic observers and policymakers have revised their forecasts upward.

The Fed, in its December Summary of Economic Projections, adjusted 2026 growth to 2.3 percent from the September estimate of 1.8 percent.

But although the current administration is penciling in non-inflationary growth, consumers are still airing their grievances surrounding affordability challenges.

Consumer surveys—the University of Michigan’s consumer sentiment index and The Conference Board’s consumer confidence index—have spotlighted the public’s growing discontent over persistent price pressures.

Bessent said he believes that the United States will transition from affordability challenges to “prosperity” next year.

“The American people don’t know how good they have it,” he said.

“Now, Democrats created scarcity, whether it was in energy or over-regulation, [so] we are now seeing this affordability problem, and I think next year we’re going to move on to prosperity.”

November’s annual inflation rate eased to 2.7 percent. Core inflation, which removes volatile energy and food prices, slowed to 2.6 percent, the lowest level since March 2021.