In news from December 23, 2025, the strong momentum of the US economy in the third quarter was primarily driven by robust consumer spending and business investment. However, the growth rate has slowed down due to the recent government shutdown and rising prices.
According to reports from Reuters, the US Department of Commerce released the preliminary estimate of the third-quarter Gross Domestic Product (GDP) on Tuesday, December 23. The decrease in imports helped contain the trade deficit, boosting economic growth. Additionally, the rush by consumers to purchase electric vehicles before the September 30 tax credit expiration played a significant role in the unexpectedly high consumer spending.
The 43-day government shutdown in recent times delayed the release of this third-quarter economic data. This data is likely to confirm what economists call a “K-shaped economy,” where high-income households are performing well while middle and low-income households struggle to make ends meet. Survey data shows that consumer spending, which is a driving force of the economy, is being fueled by high-income households benefiting from the prosperity of the stock market.
Economists point out that most large corporations have successfully weathered the impacts of President Trump’s comprehensive tariff policies. While tariffs have increased costs, these companies are investing in the field of artificial intelligence, strengthening their economic power. On the other hand, small and medium-sized enterprises have been hit harder by the impacts.
Brian Bethune, an economics professor at Boston College, expressed concerns about the upcoming fourth quarter, stating that even though the current quarter’s performance is strong, ordinary families are struggling to maintain a balance in their budgets due to minimal growth in real wages.
Economists surveyed by Reuters estimate that the GDP annual growth rate for the third quarter could reach 3.3%, compared to the 3.8% growth in the second quarter.
The US Department of Commerce’s Bureau of Economic Analysis will also release preliminary estimates of corporate profits for the third quarter, as well as domestic total income data to measure economic growth from an income perspective.
The nonpartisan Congressional Budget Office estimates that the recent government shutdown may cause a decline of 1.0 to 2.0 percentage points in fourth-quarter GDP growth. While most of this decline is expected to be recovered, it is likely that losses of $7 to $14 billion may remain unrecovered.
Consumer spending accounts for over two-thirds of economic activity in the US, with an estimated growth rate exceeding the 2.5% from the second quarter. Apart from early purchases of electric cars by households, spending in services such as air travel and hotel accommodations may also boost consumption.
A report from the Bank of America Research Institute shows that low-income families are living on tight budgets, with more of their spending going towards groceries rather than dining out this year. They have also cut back on clothing, air travel, and hotel expenses, reflecting their limited alternative spending capacity in an environment of rising inflation.
In contrast, higher-income households have seen an increase in spending on dining out, travel, entertainment, and hotel accommodations.
Business investment appears to be contributing to GDP growth, reflecting continued strong intellectual property and equipment spending in the field of artificial intelligence. However, investment in structures such as factories has seen a decline for the seventh consecutive quarter.
Bernard Yaros, chief US economist at the Oxford Economics Research Institute, noted that while data center construction continues to thrive, the decrease in oil prices leading to a reduction in drilling platforms likely hampers investment in commercial building structures.
The trade policies of the Trump administration have raised prices on certain imported goods, posing affordability challenges for some ordinary families. The rapid expansion of artificial intelligence and cloud computing data centers has increased the demand for electricity, consequently raising household electricity expenses.
Inflation is expected to accelerate in the third quarter, with the Personal Consumption Expenditures (PCE) price index predicted to rise by 2.8%, compared to 2.1% in the second quarter. This is a key indicator monitored by the Federal Reserve in tracking its 2% inflation target.
The US Federal Reserve recently lowered the benchmark overnight interest rate by 25 basis points to 3.50% to 3.75%, but indicated that borrowing costs are unlikely to drop further in the short term as policymakers await clarity on labor market conditions and inflation trends.