U.S. Economy Surges 4.3% in Q3, Beating Forecasts as Consumer Demand and Inflation Pick Up

The U.S. economy expanded at a much faster pace than expected in the third quarter, growing at an annualized rate of 4.3%, according to data released by the U.S. Commerce Department. The reading comfortably exceeded market expectations for 3.2% growth and marked a sharp acceleration from the 3.8% pace recorded in the second quarter.

The report was published nearly two months later than usual due to the federal government shutdown, but investors largely welcomed the upside surprise, viewing it as evidence that economic momentum was strong before activity was disrupted.

“This is a very solid print albeit very lagged,” said Tatiana Darie, macro markets strategist at Bloomberg. “Still, signs of a resilient consumer before the shutdown-related disruption is a reassuring signal and bond traders are running with it.”

Consumer Spending Drives Growth

A closer look at the data showed that household demand was a key engine of growth. Personal consumption expenditures rose at a 3.5% annualized rate, accelerating sharply from 2.5% in the previous quarter. The pickup highlights the continued resilience of U.S. consumers despite higher interest rates and tighter financial conditions.

Inflation Pressures Re-Emerge

Stronger growth was accompanied by firmer inflation signals. The GDP price index climbed 3.8%, up from 2.1% in the second quarter, while core PCE inflation—a closely watched measure of underlying price pressures—edged up to 2.9% from 2.6%. The data suggest that price pressures intensified alongside stronger demand, complicating the inflation outlook.

Mixed Signals From Manufacturing

In contrast to the robust GDP figures, more recent data pointed to softness in parts of the economy. Durable goods orders fell 2.2% month over month, according to the U.S. Census Bureau, undershooting expectations for a 1.5% decline. The sharper-than-anticipated drop signals a pullback in demand for long-lasting manufactured goods and raises questions about momentum heading into the final quarter of the year.

Overall, the stronger-than-expected Q3 growth underscores the U.S. economy’s resilience before the shutdown, but the combination of rising inflation pressures and weakening manufacturing indicators leaves markets debating how sustainable that strength will be as policymakers look toward 2026.