By Chicago Times Magazine –
December 23, 2025
The U.S. economy picked up speed in the third quarter of 2025, posting a surprisingly brisk 4.3 percent annualized gain in real gross domestic product. The Bureau of Economic Analysis released the initial estimate after a delay tied to the recent government shutdown, and the numbers show a broad-based upswing led by consumers, a rebound in exports, and a notable lift from government spending.
After a 3.8 percent gain in the second quarter, the economy’s acceleration in July through September reflected several shifting forces. Households kept spending, exporters found firmer footing, and federal and state outlays rose—together more than offsetting a decline in investment. A drop in imports also helped the headline figure because imports are subtracted from GDP.
The headline growth was accompanied by a strong nominal showing: current-dollar GDP rose 8.2 percent, signaling that both output and prices contributed to the quarter’s momentum. Corporate profits surged, with after-adjustment profits up $166.1 billion, a dramatic swing from the modest increase recorded in the prior quarter.
Consumer spending was the engine of the quarter, and the data suggest households continued to draw on income and savings to support purchases. Exports staged an upturn, reversing some of the weakness seen earlier in the year, while government spending provided an additional boost. Investment, by contrast, remained a drag overall, though the decline was smaller than in the previous quarter—helping explain why growth accelerated.
Real final sales to private domestic purchasers, which strips out trade and government swings and focuses on domestic demand, rose 3.0 percent, a modest improvement from the second quarter’s 2.9 percent. Real gross domestic income increased 2.4 percent, and the average of real GDP and real GDI—a useful smoothing measure—advanced 3.4 percent.
Price measures moved noticeably higher in the quarter. The gross domestic purchases price index climbed 3.4 percent, up from 2.0 percent in the prior quarter. The PCE price index, the Federal Reserve’s preferred inflation gauge, rose 2.8 percent, while core PCE—which excludes food and energy—was 2.9 percent. Those readings point to broadening price pressures that will be closely watched by policymakers and markets alike.
The jump in corporate profits was one of the quarter’s standout features. After inventory valuation and capital consumption adjustments, profits from current production rose sharply, reinforcing the picture of an economy where firms are seeing stronger top-line activity and, in many cases, improved margins. The combination of robust nominal GDP growth and rising profits suggests corporate balance sheets entered the final months of the year on firmer footing.
The third-quarter report paints a picture of an economy that regained momentum in the late summer, but the durability of that momentum is not guaranteed. Key questions for the months ahead include whether investment will recover, how consumers respond to higher prices, and whether inflationary pressures ease or persist. Policymakers will be weighing those dynamics as they consider the path of interest rates and other measures.
For businesses and investors, the quarter offers both opportunity and caution: demand is solid, but rising costs and the uncertain investment outlook mean decisions about hiring, capital spending, and pricing will be made with an eye to both growth and inflation.
