Q3 U.S. GDP Surges to 4.3%, Driven by Healthcare Spending and Resilient Consumers — Evening Brief – 12.23.25 

The U.S. economy grew at a blistering 4.3% annual rate in the third quarter of 2025, accelerating from 3.8% in the second quarter and handily beating the 3.2% consensus forecast, according to the Bureau of Economic Analysis’s initial estimate, which was delayed by the recent government shutdown. 

The top-line beat was driven by a broad-based pickup in activity: consumer spending accelerated, investment contraction slowed, and both exports and government spending increased. Personal consumption expenditures (PCE) rose at a 3.5% annual rate, up from 2.5% in Q2 and well ahead of the 2.7% consensus. Spending on goods grew 3.5%, while services spending jumped 3.7%. 

However, the composition of growth suggests less discretionary momentum than the headline implies. A significant portion of the consumption gain came from healthcare spending, which contributed a massive 0.76 percentage points to the annualized rate. This indicates that households are absorbing higher essential costs rather than splurging on discretionary items. Real final sales to private domestic purchasers—a cleaner measure of underlying demand—rose a steady 3.0%, virtually unchanged from 2.9% in Q2. 

Corporate profits rebounded sharply, rising 4.4% in the quarter after a muted 0.2% gain in Q2. 

Inflation metrics remained sticky, with the headline PCE price index rising 2.8% (up from 2.1% in Q2) and the core PCE price index advancing 2.9% (up from 2.6%). While these figures remain above the Federal Reserve’s 2% target, the central bank is unlikely to reverse its recent dovish shift. With the labor market showing persistent signs of softening throughout 2025, policymakers are expected to look through the lagging strength in Q3 GDP and prioritize employment stability over backward-looking inflation bumps.