The US Bureau of Economic Analysis (BEA) released the preliminary GDP data for the third quarter of 2025, showing stronger-than-expected economic growth accompanied by higher inflation.
The economy expanded at an annualised rate of 4.3%, surpassing market expectations of 3.3%. Consumer spending grew by 3.5%, up from 2.5% in the previous quarter. Sales increased by 4.6%, though this was lower than the 7.5% growth seen last quarter.
Inflationary pressures were marked, with the GDP deflator rising 3.7%, higher than the 2.7% estimate and up from 2.1% previously. Core Personal Consumption Expenditures (PCE) inflation held steady at 2.9%, matching forecasts but up from 2.6% earlier.
Breaking down the GDP growth contributors: household consumption was the dominant driver, adding 2.40 percentage points to the overall figure, illustrating strong resilience in private spending despite concerns about a slowdown. Exports contributed 0.90 percentage points, reflecting robust global demand for US goods and services. A reduction in imports—which subtract from GDP because of calculation methodology—added 0.65 percentage points. Government spending supported growth modestly with a 0.40 percentage point contribution.
On the downside, private domestic investment was the only negative factor, trimming GDP by 0.02 percentage points. This suggests some caution among businesses on capital investment and residential construction during the quarter.
Overall, the 4.3% growth rate underscores the US economy’s relative strength compared to other global markets. Consumer spending remains the economic engine as the year progresses, despite some uncertainties related to trade and labour markets.
The Atlanta Fed’s GDPNow model estimated a lower growth figure of 3.5% for Q3, below the BEA’s 4.3% actual outcome. The model also showed a smaller contribution from consumer spending at 1.84 percentage points versus the BEA’s 2.40. Inventory investment contributions were adjusted down to 0.09 percentage points.
In response to the GDP release, the US dollar strengthened, partially reversing earlier holiday trading losses. The EURUSD pair tested December highs near 1.1800, rising from a close yesterday at 1.1761. It recorded an intraday low of around 1.1772.
Meanwhile, USDJPY dropped from a close at 157.03 to a pre-report low of 155.64, but has since rebounded to about 156.44—just above the 100-hour moving average at 156.40.
This data provides forex traders with a clearer picture of the US economy’s robust but inflationary growth environment, reinforcing the dollar’s relative strength. Monitoring consumer spending trends and investment activity will be key for anticipating future market moves as the year unfolds.
Original Source: Greg Michalowski of investinglive.com
