The U.S. economy grew at an annualised rate of 4.3 per cent in the third quarter, marking its fastest expansion in two years as robust consumer spending powered activity in the world’s largest economy.
The growth figure was revised up sharply from an earlier estimate of 3.8 per cent and exceeded Wall Street expectations of 3.3 per cent, according to data released by the U.S. Bureau of Economic Analysis. The performance surpassed the 3.8 per cent growth recorded in the previous quarter and represented the strongest showing since the third quarter of 2023.
The latest figures underline the resilience of the U.S. economy in a year when it has significantly outperformed other advanced economies. While the UK posted an annualised growth rate of just 0.4 per cent in the same period and the eurozone expanded by about 1.2 per cent, the U.S. continued to benefit from strong household demand and heavy investment in artificial intelligence infrastructure by major technology companies.
Consumer spending accounted for more than two percentage points of the third-quarter growth, the bureau said, highlighting the central role of American households in sustaining economic momentum. Exports contributed just under one percentage point, while imports fell after the introduction of tariffs on goods from overseas. Government spending also supported growth, though total investment weighed slightly on overall output.
The dip in investment raised questions about whether the earlier AI-driven boost to growth may be losing some momentum. Paul Ashworth of Capital Economics said the data suggested the AI boom may have “taken a step backwards” after playing a major role in driving expansion earlier in the year.
The strong economic performance is likely to fuel debate within the Federal Reserve over the timing of future interest rate cuts. Policymakers have already reduced rates three times this year, but the pace of growth and rising inflation could strengthen the case for holding borrowing costs steady in 2026 despite pressure from the White House.
Inflation indicators moved higher in the quarter, with the personal consumption expenditure index rising to 2.8 per cent from 2.1 per cent. Core inflation, which excludes energy prices, climbed to 2.9 per cent, well above the Fed’s long-term target of around 2 per cent.
Financial markets reacted swiftly to the data. U.S. government bond prices slipped, pushing the yield on two-year Treasury notes up to 3.52 per cent as investors pared back expectations for rate cuts next year. The dollar weakened against major currencies and fell to a three-month low, while gold continued its rally, rising 1.2 per cent to a fresh record of $4,406 an ounce as investors sought alternatives to the greenback.
