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One-Sentence Summary: The U.S. economy grew at an annual rate of 4.3 percent in the third quarter of 2025, driven by increases in consumer spending, exports, and government spending, while corporate profits rose 166.1 billion dollars compared to the second quarter.
Article Summary:
The Bureau of Economic Analysis released its initial estimate for third quarter 2025 economic growth on December 23, 2025, revealing that real gross domestic product increased at an annual rate of 4.3 percent. This represents an acceleration from the second quarter’s 3.8 percent growth rate. The release of this report was delayed due to a federal government shutdown that occurred in October and November, which disrupted the normal schedule of economic data releases.
The economic growth in the third quarter reflected several positive contributors. Consumer spending increased across both goods and services, with health care services and recreational goods leading the way. Health care growth was supported by increases in both outpatient services and hospital care, based on newly available Census Bureau data. International travel and professional services also contributed to the services sector growth. Within goods, consumers purchased more information processing equipment and prescription drugs.
Export growth represented another bright spot for the economy. Both goods and services exports increased, with capital goods and business services showing particular strength. The increase in goods exports was led by capital goods excluding automotive products and nondurable consumer goods, while services exports were driven by professional and management consulting services.
Government spending at both the federal and state levels contributed positively to growth. State and local government spending increased primarily through consumption expenditures, while federal spending growth was led by defense-related consumption.
However, the quarter was not without challenges. Investment decreased overall, primarily due to a decline in private inventory investment. This reduction was concentrated in wholesale trade and manufacturing sectors. The decrease in inventories partially offset the positive contributions from consumer spending and exports. Imports, which subtract from GDP calculations, actually decreased during the quarter, providing a positive mathematical contribution to overall growth.
Price pressures accelerated during the third quarter. The price index for gross domestic purchases increased 3.4 percent, up from 2.0 percent in the second quarter. The personal consumption expenditures price index, which the Federal Reserve monitors closely for inflation signals, increased 2.8 percent compared to 2.1 percent previously. Even excluding the volatile food and energy categories, core PCE inflation accelerated to 2.9 percent from 2.6 percent.
Real final sales to private domestic purchasers, which combines consumer spending and gross private fixed investment, increased 3.0 percent in the third quarter. This measure provides insight into underlying private sector demand and showed modest acceleration from the second quarter’s 2.9 percent increase.
The report also included preliminary data on corporate profits. Profits from current production increased substantially by 166.1 billion dollars in the third quarter, a significant jump from the second quarter’s modest 6.8 billion dollar increase. However, these estimates were reduced by several major legal settlements that were finalized during the quarter. A domestic health insurance provider reached a 2.8 billion dollar settlement over antitrust allegations, while a domestic e-commerce company settled with the federal government for 2.5 billion dollars over deceptive enrollment practices. These settlements are recorded in the national accounts when finalized, regardless of when they appear on company financial statements.
Real gross domestic income, which measures the economy from the income side rather than the spending side, increased 2.4 percent in the third quarter. This represented a slight deceleration from the second quarter’s 2.6 percent growth. The average of real GDP and real GDI, which some economists consider a more reliable measure of economic activity, increased 3.4 percent.
The technical notes accompanying the release explained that the government shutdown resulted in delays to many principal data sources used for GDP estimation. As a result, this initial estimate for the third quarter combined data and methods typically used for both the advance and second estimates. The next update is scheduled for January 22, 2026, when the Bureau will release an updated third quarter estimate along with GDP by industry data and revised corporate profits figures.
U.S. Bureau of Economic Analysis. “Gross Domestic Product, 3rd Quarter 2025 (Initial Estimate) and Corporate Profits (Preliminary).” December 23, 2025. https://www.bea.gov/sites/default/files/2025-12/gdp3q25-ini.pdf
Key Takeaways:
- Real GDP grew at a 4.3 percent annual rate in the third quarter of 2025, accelerating from 3.8 percent in the second quarter and representing the strongest growth in recent quarters.
- Consumer spending drove economic expansion, with notable increases in health care services, international travel, recreational goods, and prescription drugs based on newly available Census Bureau data.
- Corporate profits from current production increased 166.1 billion dollars after rising only 6.8 billion dollars in the second quarter, though large legal settlements reduced the total.
- Inflation pressures intensified during the quarter, with the PCE price index rising 2.8 percent compared to 2.1 percent previously, while core PCE inflation accelerated to 2.9 percent from 2.6 percent.
- Private inventory investment declined significantly, concentrated in wholesale trade and manufacturing, partially offsetting positive contributions from consumer spending and exports.
Most Important Quotations:
- “Real gross domestic product increased at an annual rate of 4.3 percent in the third quarter of 2025, according to the initial estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.”
- “Due to the recent government shutdown, this initial report for the third quarter of 2025 replaces the release of the advance estimate originally scheduled for October 30 and the second estimate originally scheduled for November 26.”
- “The increase in real GDP in the third quarter reflected increases in consumer spending, exports, and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.”
- “The personal consumption expenditures price index increased 2.8 percent, compared with an increase of 2.1 percent. Excluding food and energy prices, the PCE price index increased 2.9 percent, compared with an increase of 2.6 percent.”
- “Profits from current production increased 166.1 billion dollars in the third quarter, compared with an increase of 6.8 billion dollars in the second quarter.”