The US economy gained momentum during the three months to September as consumer outlays and exports boomed. The world’s largest economy grew at an annual rate of 4.3%, up from 3.8% in the previous quarter. That was better than expected and marked the strongest growth in two years, according to Robert Briggs, senior economist at Wells Fargo Securities.
The report, which the US government shutdown delayed, offers insights into an economy challenged by trade and immigration policy shocks, as well as by high inflation and government spending reductions.
Economy Defies Doom and Gloom Projections
However, although this has caused big variations in certain fields like imports and exports, the overall economy has been moving forward with robust performance, defeating many predictions. It’s an economy that is completely contrary to doom and gloom scenarios, starting from the beginning of 2022, said Aditya Bhave, Bank of America’s senior economist. Mr Bhave described the economy as being ‘very very resilient’.
The total growth rate during the third quarter of the year was much higher than expected, with most analysts forecasting an average rate of 3.2% per year. It was boosted by consumer expenditures, which increased at an annual pace of 3.5%, up from 2.5% in the previous quarter, despite the slowing labour market, due to increased expenditures on health services.
Imports Dwindle as Exports Soar
Imports, which are subtracted from growth, fell as a result of a spate of taxes imposed on imports coming into the US that President Donald Trump announced this spring. On the other hand, exports, which had fallen considerably, regained their strength, rising by 7.4%. Government spending showed a recovery, thanks to expenditures on defence.
These contributed partly to offsetting the effects of slowing business investment expenditure, and intellectual property, as well as the challenges facing the housing market, still faced from higher interest rates. According to Michael Pearce, chief US economist for Oxford Economics, it seemed that the economy was well-positioned as it entered 2026, and this was due to it now feeling the effects of tax cuts and the US central bank’s decision to cut interest rates.
Rising Prices Could Weigh on Future Growth
However, some economists forecast that the price increases being experienced by some families may affect the ability of the economy to maintain the sharp pace experienced during the latest quarter.
During the period of three months ending in September, the Fed’s favourite inflation measure, the PCE price index, inched up 2.8% as opposed to a 2.1% increase in the previous quarter. Analysts warned that such prices are taking a toll on low and middle-class families, while the top income earners are still spending as they wish.
The second-quarter economic expansion occurred despite the presence of a number of challenges in the economy. These tariffs imposed by Trump affect the supply chain and increase the cost of doing business. Immigration restrictions lead to a tight labour market. Government cuts affect employment.
However, consumer spending, which accounts for approximately two-thirds of the American economy, remained strong. People boosted their outlay on healthcare services thereby improving growth rates.
The increase in exports came after big drops in exports earlier in the year due to tariffs levied by other countries against US exports in response to US tariffs imposed on their exports. But with a 7.4 per cent increase in exports, some sort of easing or way around barriers may have been realised in trade tensions.
There has been a substantial increase in the government’s expenditure on the defence of the country, which has been an added impetus to growth. This has been occurring when there has been tension in various parts of the world due to geopolitical
Business investment remained more mixed. Though fixed investment, for example, held firm, there was a deceleration in investment in intellectual property. This may be due to uncertain weather ahead or the degradation of research and development expenses.
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