- Consumer spending, services drive outsized expansion
- Government outlays, net trade, add to upside surprise
- Q3 business investment slows sharply despite AI-linked optimism
- Record government shutdown to weigh on Q4 growth trajectory

By Harry Daniels
LiveSquawk News
@HarryDaniels71

23 December 2025 | 18:00 GMT

Looking at US third-quarter data at the end of December may feel akin to checking the economy through a rear-view mirror. But when growth materially exceeds expectations, it still commands attention.

Data from the US Bureau of Economic Analysis showed the American economy expanded at an annualised 4.3% q/q pace in the three months to September. That sharply outperformed the 3.3% consensus forecast and accelerated from 3.8% in the prior quarter.

In its accompanying statement, the BEA said the expansion reflected increases in consumer spending, exports and government spending, which were partly offset by a decline in investment.

Breaking down the drivers, the agency noted solid gains across both services and goods consumption. Within services, the leading contributors were health care and other services, while on the goods side, recreational goods and vehicles, alongside other non-durable goods, provided the most significant lift.

Government spending was another key pillar of strength. State and local outlays increased, led by consumption expenditures, while federal spending rose on the back of higher defence consumption.

Net trade also supported growth, as exports of both goods and services advanced. “The increase in services was led by other business services, which include professional and management consulting services,” the BEA said. On the import side, a decline in goods — led by non-durable consumer goods — was partly offset by higher services imports, again driven by business services.

Parsing the report, Paul Ashworth, chief North America economist at Capital Economics, said the outturn was broadly in line with his firm’s 4.5% estimate. He noted that “a lot of other forecasters missed that this is essentially a second release that includes the results of the recently published quarterly services survey, which suggested services consumption and investment would come in strong.”

Economic momentum, however, did not carry cleanly into the final quarter of the year. Activity was disrupted by the record US government shutdown, which began on 1 October and lasted 43 days — eclipsing the previous record of 35 days set in 2018–19.

James Knightley, senior economist at ING, described the Q3 print as a “fantastic outcome,” but cautioned that Q4 growth was likely to be “considerably slower,” in part due to the shutdown’s drag on activity and confidence.

Another emerging headwind was business, or non-residential, investment, which slowed sharply to a 2.8% annualised pace from 7.3% previously.

Focusing on intellectual property products and equipment, Capital Economics’ Ashworth noted growth in both categories decelerated to 5.4%. Despite continued enthusiasm around data centres, investment in non-residential structures contracted at a 6.3% annualised rate.

“At face value, that suggests the AI boom might have taken a step backwards after driving GDP growth in the first half of the year,” Ashworth said. “But we’re not sure the very upbeat QSS data have been fully incorporated yet, so we’ll wait for the final release next month before declaring it a bust.”

Taken together, the Q3 data underscore just how resilient the US economy was before fiscal disruption set in. While the shutdown and cooling investment point to a softer Q4 profile, the strength in services, consumption and trade suggests underlying momentum was firmer than many had assumed. For policymakers and markets alike, the challenge now lies in disentangling temporary political noise from the economy’s true trajectory as the year draws to a close.