US Economy Expands 43 Per Cent in Q3 2025 Outpacing G7 Peers

The United States economy expanded at an annualised rate of 4.3 per cent during the third quarter of 2025, marking the strongest growth performance in two years. The US Bureau of Economic Analysis revised its initial estimate upward from 3.8 per cent, significantly exceeding Wall Street consensus forecasts of 3.3 per cent growth.

This acceleration represents the most robust quarterly expansion since Q3 2023 and surpasses the previous quarter’s 3.8 per cent rate. The primary driver of this performance was consumer spending, which contributed more than 2 percentage points to the annualised growth figure. American households demonstrated continued resilience despite broader economic uncertainties and elevated price levels compared to pre-pandemic benchmarks.

The growth differential between the United States and other G7 economies remains substantial. Britain recorded an annualised growth rate of merely 0.4 per cent in the same period, whilst the eurozone registered approximately 1.2 per cent year-on-year output growth. This divergence underscores the relative strength of American consumer demand and the impact of concentrated investment in artificial intelligence infrastructure by major technology corporations.

Exports contributed just under 1 percentage point to third-quarter growth, supported by reduced import volumes following the April tariff implementations. Government spending provided additional stimulus during the quarter; however, total investment exerted a modest negative impact on overall economic activity, according to bureau data.

The robust GDP figures complicate the Federal Reserve’s monetary policy calculus. Central bank officials must now weigh sustained economic momentum against persistent inflationary pressures and signs of labour market cooling. The Fed implemented three interest rate reductions during 2025 but has signalled heightened uncertainty regarding future policy adjustments.

Inflation data accompanying the GDP release showed the personal consumption expenditure index rising to 2.8 per cent in Q3 from 2.1 per cent previously. Core inflation, excluding volatile energy costs, increased from 2.6 per cent to 2.9 per cent, remaining above the Federal Reserve’s 2 per cent annual target. This inflationary acceleration may strengthen arguments among Fed officials for maintaining current interest rate levels throughout 2026 rather than pursuing additional monetary easing.

Market participants currently anticipate one additional 25 basis point rate cut in March 2026, which would bring the federal funds rate to a range of 3.25 to 3.5 per cent. Economic forecasters expect growth deceleration in the fourth quarter, partly attributable to the extended federal government shutdown lasting more than a month. Consumer confidence indicators reflect this caution, with household sentiment reaching its joint lowest level in five years.

Financial markets responded to the GDP data with modest gains across major equity indices. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite each advanced less than 1 per cent in early trading. Government bond prices declined, reflecting reduced expectations for aggressive monetary easing. The yield on two-year Treasury securities, particularly sensitive to near-term policy outlook shifts, rose 3 basis points to 3.54 per cent.

Currency markets saw the dollar weaken 0.2 per cent against a basket of major currencies and decline 0.33 per cent versus sterling to trade at $1.35. The greenback has retreated to its weakest level in three months this week. Gold continued its record-breaking rally, appreciating 1.2 per cent to reach $4,406 per ounce as investors seek alternatives amid dollar weakness.

The sustainability of this growth trajectory faces several challenges. Political pressure on Federal Reserve independence, ongoing tariff policies, and the potential for fiscal policy shifts all introduce considerable uncertainty into the economic outlook. Experienced investors will monitor fourth-quarter data closely to assess whether this exceptional performance represents a sustainable trend or a temporary acceleration driven by specific policy dynamics and consumer behaviour patterns.