By Elisabeth Buchwald, NCS
(NCS) — An preliminary studying of third-quarter gross home product confirmed the US economy expanded at an inflation-adjusted annualized fee of 4.3%, a far sooner pace than the 3.8% recorded in the second quarter, in line with Commerce Department knowledge launched Tuesday. That’s the fastest progress fee in two years.
An acceleration in client spending, up 3.5% from 2.5% in the second quarter, and exports, up 8.8% from -1.8% in the second quarter, had been the most important contributors to the third-quarter GDP studying.
Federal spending additionally performed a large function, a mirrored image of the massive uptick in protection spending as effectively as buyouts for federal employees, a part of efforts to in the end decrease authorities spending. The fourth-quarter GDP report set to be launched subsequent month, nonetheless, is predicted to be negatively impacted by a drop in federal spending ensuing from the 43-day authorities shutdown.
President Donald Trump mentioned Tuesday the report was a mirrored image of his sweeping tariffs, which he elevated considerably throughout the third quarter. However, a pending Supreme Court case may nullify a lot of the tariffs he’s enacted and doubtlessly end result in massive refunds to importers.
“The TARIFFS are responsible for the GREAT USA Economic Numbers JUST ANNOUNCED…AND THEY WILL ONLY GET BETTER!” Trump wrote on his social media platform. “Also, NO INFLATION & GREAT NATIONAL SECURITY. Pray for the U.S. Supreme Court!!!”
While Trump has regularly pushed for the Federal Reserve to lower rates in order to spice up the economy, Tuesday’s report seemingly provides the central financial institution even much less cause to chop charges when it reconvenes subsequent month.
A combined financial image
The GDP report is akin to a hen’s-eye view of the economy. From that perspective, the economy appears to be like prefer it’s on strong footing. But zooming in additional reveals a much less rosy view.
While rich Americans proceed to drive a lot of the progress in client spending, lower- and middle-income customers have been rather more cautious. Economists name that phenomenon a “K-shaped” economy.
“The K-shaped economy is staring us right in the face,” James Knightley, chief worldwide economist at ING, mentioned in a be aware on Tuesday following the launch of the GDP report. Economic progress, he mentioned, is “concentrated among higher-income households and tech-led investment, while broader consumer confidence remains under pressure.”
Less than two hours after the GDP report was launched, the Conference Board reported client confidence declined considerably this month, down 3.8 factors from November. The December studying of 89.1 was the lowest since April, when Trump launched his “Liberation Day” tariffs.
The report confirmed that buyers’ views of their household’s present monetary state of affairs dipped into detrimental territory for the first time in almost 4 years.
Consumers throughout all earnings ranges additionally expressed extra concern about the state of the labor market, with the unemployment fee recently hitting a four-year excessive. The share of those that mentioned jobs are plentiful fell to the lowest stage in 4 years. Meanwhile, for the first time since September 2024, companies reported a web detrimental view of the economy.
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