Consumer spending lifted economy 4.4% in third quarter, fastest in two years

Powered by strong consumer spending, the U.S. economy grew at the fastest pace in two years from July through September, the government said Thursday in a slight upgrade of its first estimate.

America’s gross domestic product — the nation’s output of goods and services — rose at a 4.4% annual pace in the third quarter, the Commerce Department reported Thursday, up from 3.8% in the April-June quarter and from the 4.3% growth the department initially estimated. The economy hasn’t grown faster since third-quarter 2023.

Consumer spending, which accounts for 70% of U.S. GDP, grew at a healthy 3.5% pace. Spending on services such as healthcare rose 3.6% versus a 3% uptick on goods spending, including an increase of just 1.6% on so-called durable goods such as cars that are meant to last at least three years. A surge in exports and a drop in imports also contributed to robust third-quarter growth.

Business investment (excluding homebuilding) rose at a 3.2% clip, partly reflecting bets on artificial intelligence.

The economy has remained resilient despite uncertainty caused by President Trump’s economic policies, particularly his double-digit taxes on imports from almost every country on Earth.

Despite the strong growth numbers, many Americans are dissatisfied with the state of the economy and especially the high cost of living.

The gap between how consumers say they feel and the strong spending numbers might reflect a “K-shaped economy.” Wealthier Americans are spending more, their incomes boosted by market gains and growing investments, while lower-income households struggle with stagnant pay and high prices.

The job market also looks a lot weaker than the overall economy. Employers have added a lackluster 28,000 jobs a month since March. In the 2021-23 hiring boom that followed COVID-19 lockdowns, by contrast, they were creating 400,000 jobs a month. Still, the unemployment rate remains low at 4.4%, suggesting a no-hire, no-fire labor market with companies hesitant to bring on new employees but reluctant to let go of the ones they have.

“The United States is experiencing a jobless boom where strong growth is powered by AI investments and consumption by wealthier families, but there is almost no hiring,” said Heather Long, chief economist at Navy Federal Credit Union. “It’s an uneasy situation for many middle-class families. One of the big questions for 2026 is whether the middle class will start to feel the uplift from the boom.”

Wiseman writes for the Associated Press.