Third-Quarter Economic Growth at 2-Year High Amid Consumer Spending Boost

10:22 AM EST, 12/23/2025 (MT Newswires) -- The US economy grew at the fastest pace in two years in the third quarter amid robust consumer spending, likely allowing the Federal Reserve to keep interest rates unchanged at next month.

Real gross domestic product in the world's largest economy rose at an annual rate of 4.3% in the September quarter, according to an initial estimate released Tuesday by the Bureau of Economic Analysis. The consensus was for 3.3% growth in a survey compiled by Bloomberg.

The GDP expansion followed a 3.8% increase in the June quarter.

Tuesday's report was delayed by almost two months due to the recent US federal government shutdown. It replaces a second BEA estimate that was set to be published on Nov. 26.

"The (third-quarter) GDP report suggests the economy maintains brisk momentum, despite tariffs and immigration curbs," Sal Guatieri, senior economist at BMO Capital Markets, said in a report.

Consumer spending, as measured by the personal consumption expenditures index, advanced 3.5% in the September quarter, the fastest in three quarters and exceeding the 2.7% consensus estimate, the BEA's data showed. The second quarter logged a 2.5% rise.

The rise in core PCE price index, which is the Fed's preferred inflation metric and excludes volatile food and energy prices, accelerated to 2.9%, as Wall Street expected, from the prior quarter's 2.6%. The headline PCE price index rose to 2.8% from 2.1%.

"The report will greatly lessen the odds of a Fed rate cut on Jan. 28, and even adds some doubt about future moves," Guatieri said. "Given the economy's resilience, softness in both employment and inflation might be needed to spur rate cuts in 2026."

Markets are pricing in a roughly 87% probability that the central bank will hold rates steady next month, up from Monday's 80%. The Fed cut rates by a total of 75 basis points at its most recent three policy meetings.

Exports in the third quarter jumped 8.8% following a 1.8% fall in the June quarter, while imports shrank 4.7%. Guatieri said a weaker US dollar helped boost exports, while tariffs weighed on imports.

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