NEW YORK: US economic growth in the third quarter came in at 4.3 percent on an annualized basis, easily topping expectations, according to Commerce Department data released Tuesday.
The report, which also showed an acceleration in inflation, provides reassurance about the world’s largest economy after other recent data showing a weakening labor market. It comes as worries have moderated over President Donald Trump’s tariffs and as large tech companies advance massive investments to build new artificial intelligence infrastructure.
The gross domestic product report – delayed for nearly two months due to a government shutdown – reflects increases in consumer spending, exports and government spending, partially offset by a decrease in investment, according to the department’s Bureau of Economic Analysis.
The reading, an initial estimate expected to be updated in early 2026, marks the highest GDP in two years. Analysts had expected 3.2 percent growth, according to consensus estimates from MarketWatch and Trading Economics.
The report also showed the price index for domestic purchases rose 3.4 percent, a much higher inflation reading compared with 2.0 percent in the second quarter.
The data suggest faster growth and higher inflation than markets had expected – potentially changing the calculus for upcoming US monetary policy decisions.
US shutdown hurting economy, food assistance
Other recent data has shown a weakening job market that has prompted the Federal Reserve to cut interest rates at the last three meetings, viewing the employment picture as its prime concern even as inflation has lingered above two percent.
US stock futures fell following the GDP data, likely reflecting lower odds that the Fed will again cut next month.
“I think the implication is that with the GDP numbers being as strong as they are, that gives the Fed additional reason to be on hold at the January (Fed) meeting,” said CFRA Research’s Sam Stovall.
While inflation remains well above the Fed’s two percent target, Fed Chair Jerome Powell and other policymakers have described the weakening employment market as the greater concern at the moment.
The Fed’s median 2026 GDP forecast is 2.3 percent, up from 1.7 percent projected in 2025, according to a summary of the central bank’s outlook.
Ebbing tariff angst
Tuesday’s report reflects a much improved US macroeconomic outlook compared with earlier in 2025, when worries about Trump’s aggressive trade policy changes weighed on sentiment.
But by the latter stages of 2025, Trump’s administration had negotiated agreements with China and other major economies that prevented enactment of the most onerous tariffs.
Meanwhile, an AI investment boom by Chat GPT-maker OpenAI, Google and other tech giants continued to pick up momentum, keeping the US stock market near record levels.
A December 18 outlook piece from S&P Global Ratings said AI investment would likely buoy the economy but could be offset by political uncertainty under Trump.
“US trade policy uncertainty has settled down, but not US policy drama overall,” S&P said.
“Statutory US tariff rates may not move much in 2026, but uncertainty around laws, norms, investment rules, military actions and geopolitics more generally will remain elevated,” S&P said. “This uncertainty will likely dampen investment and discretionary consumption.”
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