The U.S. economy outpaced forecasts in the third quarter of 2025, expanding at a 4.3% annualized clip as consumers accelerated their spending, according to data released Tuesday by the Commerce Department’s Bureau of Economic Analysis.
This preliminary estimate contrasted with the 3.3% increase predicted by economists polled by Reuters and followed growth of 3.8% in the second quarter.
A considerable portion of the surge in consumer spending was concentrated in the run-up to the September 30 expiration of tax credits for electric vehicles, prompting a last-minute buying spree. Last quarter, personal consumption climbed by 3.5%, up from a 2.5% advance in the preceding quarter. However, Commerce Department data—delayed due to a 43-day government shutdown—show slowdowns in vehicle purchases in October and November and mixed results in other spending categories.
The recent shutdown, which cast a shadow over government operations, has contributed to waning economic momentum since September. The nonpartisan Congressional Budget Office (CBO) expects the shutdown to shave between one and two percentage points off fourth-quarter GDP, warning that while most of the output lost will be recouped, as much as $14 billion may remain unrecovered.
Inflation pressures, meanwhile, remained elevated during the third quarter. The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred metric, recorded a 2.8% increase, with the core index—excluding food and energy—rising 2.9%. Both exceeded the previous quarter’s readings and linger above the Fed’s 2% target. The chain-weighted price index, which adjusts for shifts in consumer purchasing habits, jumped 3.8%, notably above projections.
In other highlights from the report, corporate profits surged by $166.1 billion, a 4.2% rise compared to a second-quarter uptick of just $6.8 billion.
The Federal Reserve responded earlier this month by reducing its benchmark overnight rate for the second time this year, lowering it by 25 basis points to a target range of 3.50%-3.75%.
