Trump Gets Great Economic Sign
The U.S. economy delivered a stronger-than-expected performance in the third quarter, expanding at a robust 4.3% annual rate — the fastest pace in roughly two years — according to newly released federal data. The growth surge was largely fueled by continued consumer spending, even as inflation and economic uncertainty persist.
The Commerce Department reported that gross domestic product (GDP), the broadest measure of economic output, accelerated from a 3.8% pace in the previous quarter. Most economists had predicted a slowdown, with forecasts averaging closer to 3%, making the latest figures a notable surprise.
Consumer Spending Continues to Carry the Economy
Once again, American consumers proved to be the primary engine of growth. Consumer spending — which accounts for about 70% of U.S. economic activity — rose at a 3.5% annual rate during the July-to-September period, a clear increase from the prior quarter.
However, many economists caution that this strength may be masking underlying strain. With prices still elevated, households may be relying more heavily on savings or credit to maintain spending levels — a trend that could prove unsustainable over time.
Confidence Weakens as Economic Anxiety Grows
Despite solid spending, consumer confidence has shown signs of deterioration. A recent survey from the Conference Board revealed confidence levels slipping to lows not seen since earlier this year, when trade disruptions and tariff uncertainty rattled markets.
Some analysts say the growing gap between how consumers feel and how they spend is a warning sign. History suggests that when confidence erodes, spending often follows — sometimes abruptly.
A Divided Economy Becomes More Apparent
Economists increasingly describe today’s recovery as uneven, often referred to as a “K-shaped” economy. In this scenario, higher-income households benefit from rising asset values and investment income, while middle- and lower-income Americans struggle with rising costs and limited wage growth.
Recent data supports that assessment. Much of the spending growth appears concentrated among older, wealthier consumers, particularly in service-related sectors, while many working families continue to feel pressure from everyday expenses.
Inflation Remains a Key Concern for Policymakers
Inflation continues to run above the Federal Reserve’s preferred target. The personal consumption expenditures (PCE) price index rose at a 2.8% annual rate in the third quarter, up from earlier in the year. Core inflation, which excludes food and energy, also edged higher.
Persistent inflation could complicate expectations for additional interest rate cuts, even as the Federal Reserve closely monitors signs of a slowing labor market.
Some market observers warn that inflation — not recession — may reemerge as the most serious economic threat if spending remains strong while supply remains constrained.
Business Investment Shows Mixed Signals
The report also highlighted continued investment in artificial intelligence and intellectual property, reflecting strong interest in advanced technologies. At the same time, private business investment overall declined slightly, dragged down by weakness in housing and commercial real estate.
Government spending increased modestly, supported by higher state and local expenditures as well as increased defense spending. Exports rose sharply during the quarter, while imports declined, providing an additional boost to overall growth.
Labor Market Slows Despite Ongoing Expansion
Beneath the surface of strong GDP growth, the labor market has clearly cooled. Job creation has slowed significantly compared to last year, and the unemployment rate recently climbed to its highest level since 2021.
Economists describe the current environment as a “low-hire, low-fire” labor market, with businesses hesitant to expand amid higher borrowing costs, trade uncertainty, and lingering economic risks.
Outlook: Growth Holds, But Risks Remain
While the economy continues to expand, many economists remain cautious about the months ahead. Inflation remains above target, consumer confidence is weakening, and job growth has slowed — all factors that could weigh on future performance.
For now, consumer spending continues to prop up the economy. Whether that strength can be sustained without reigniting inflation or straining household finances remains one of the most important questions facing policymakers and American families alike.
