U.S. economy grows at fastest pace in two years

The U.S. economy accelerated in the three months to September as consumer spending surged and exports increased.

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.

The report, delayed by the U.S. government shutdown, revealed the U.S. economy has been hit by sharp changes in trade and immigration policies, persistent inflation and government spending cuts.

But while this has led to large swings in some areas, such as imports and exports, the underlying economy remains strong, beating many forecasts.

“The U.S. economy has largely defied pessimistic expectations since the start of 2022,” said Aditya Bhave, senior economist at Bank of America.

Mr Barvey told BBC Business Today that the economy was “very, very resilient”.

“I don’t understand why this doesn’t continue,” he added.

Overall growth data for the third quarter It was much stronger than expected, with most analysts expecting annual growth of about 3.2%.

Despite a slowing job market, consumer spending increased at an annual rate of 3.5%, up from 2.5% in the previous quarter, as households spent more on health care services.

Growth-depressing imports continued to decline, reflecting President Donald Trump’s announcement this spring to impose taxes on goods entering the United States.

At the same time, exports, which had fallen sharply, rebounded, growing significantly by 7.4%. Government spending also rebounded, driven by defense spending.

The gains help overcome a slowdown in business investment, including in intellectual property, and a housing market struggling under pressure from still-high interest rates, which is exacerbating affordability issues and supply constraints.

Michael Pierce, chief U.S. economist at Oxford Economics, said the economy is in a good position heading into 2026 as it begins to feel the boost from tax cuts and recent interest rate cuts by the Federal Reserve.

“The underlying measures are consistent with solid expansion,” he said.

However, some analysts have warned that rising prices faced by some households may make it difficult to maintain the unusually strong pace of growth in the latest quarter.

The personal consumption expenditures price index, the Fed’s preferred inflation measure, rose 2.8% in the three months to September, compared with 2.1% in the previous quarter, the report said.

Analysts warn that while higher-income households continue to spend freely, rising prices are putting pressure on lower- and middle-income households.

Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, noted that some recent surveys and credit card data suggest households are reining in spending.

“Weak labor markets, stagnant real incomes and the depletion of excess pandemic-era savings appear to be finally affecting households,” he said.