It’s beginning to look a lot like Christmas … for the White House. Just as Democrats tried to force a return to economic policy with their “affordability” rhetoric, the Bureau of Economic Analysis delivered a forceful riposte.
The US economy grew 4.3% in real gross domestic product in Q3 (annualized), the best quarter of growth in the past two years. It exceeds the 3.8% growth in Q2 that had largely been seen as driven by rebalancing of the trade deficit. It’s the first BEA analysis of overall economic activity since September, thanks to the Schumer Shutdown:
Real gross domestic product (GDP) increased at an annual rate of 4.3 percent in the third quarter of 2025 (July, August, and September), according to the initial estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.
Due to the recent government shutdown, this initial report for the third quarter of 2025 replaces the release of the advance estimate originally scheduled for October 30 and the second estimate originally scheduled for November 26.
The increase in real GDP in the third quarter reflected increases in consumer spending, exports, and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Just to clarify: “real GDP” already accounts for inflation. This is growth above the rate of inflation, annualized for comparative purposes. The last six months of economic activity has shown a combined growth of 4.0% or a bit better, which is a fantastic momentum by anyone’s reckoning.
Furthermore, the trade numbers no longer appear to be warping the overall measure. In Q2’s report, the high topline GDP number appeared boosted by a -29.3% change in imports, although exports also edged down by -1.8%. Trade stabilized in Q3, perhaps to a new normal in the era of heavier tariffs of -4.7% for imports and an 8.8% increase in exports. That adds to the positive overall assessment on growth, but not unusually so. It appears that Donald Trump’s tariffs have stopped any disruptive effect and have been more or less incorporated into normal economic activity – while favoring US-made products more than before.
Consumer activity also picked up, despite the stagnant job-creation market of Q2 and Q3. Personal consumption expenditures increased by 3.5%, the best reading in 2025, with the increase evenly distributed between goods and services. Private investment declined slightly, but mainly in construction.
The only cautions in this report come in final sales to domestic purchasers (+2.9%) and to private domestic purchasers (+3.0%). That suggests some of the gain went to increased inventories, understandable before the holiday retail season. However, it may show that demand shifted forward from Q4 into Q3, and therefore the next report may not get the same amplitude.
Nevertheless, the news surprised analysts according to the Wall Street Journal, which broke out the U word:
The U.S. economy grew at an unexpectedly robust pace in the third quarter, powered by strong consumer spending.
Gross domestic product, the value of all goods and services produced across the economy, rose at a seasonally and inflation-adjusted 4.3% annual rate for the July through September quarter, the Commerce Department said Tuesday in a shutdown-delayed report.
It was the highest growth rate in two years, and reflected robust spending by consumers on services like healthcare as well as spending on recreational vehicles. Growth picked up from 3.8% in the previous quarter, and beat the 3.2% forecast among economists polled by The Wall Street Journal.
The data show the economy growing at an average annual rate of 2.5% since Trump returned to office, even after a first-quarter contraction as companies ramped up imports to get ahead of new tariffs. The growth is on par with the 2.4% average pace recorded in 2024, during the Biden presidency.
CNBC analyst Aditya Bhave called the report “very, very impressive,” especially on consumer spending:
The relation of this growth to job stagnation – at least as measured by the Bureau of Labor Statistics – is worth mentioning as well. CNBC’s panel concludes that productivity must be “off the charts,” but there is another potential explanation. The Department of Homeland Security has estimated that 2.5 million illegal aliens have exited the US since the start of the year, and many of them had been in the workforce. What may look like stagnation could instead be a transition of labor from illegitimate to legitimate workers, which is not showing up well in the way BLS measures labor metrics.
That would also explain the sustained wage growth through apparent stagnation. And it would also explain a big boost in consumer spending while few jobs get added into an economy where black-market labor has shrunk significantly. Is that the only explanation? No; perhaps productivity has really exploded, but that seems less likely as an explanation in this environment.
What is clear is that the US economy is sustaining a robust level of growth even with some nagging inflation concerns. Trump will have good reason to celebrate this report, and a lot of ammunition for his call to stay the course as the midterm season begins.
Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.
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